The Nasdaq International Securities Exchange has submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to raise the position limits for options on BlackRock’s iShares Bitcoin Trust (IBIT) exchange-traded fund (ETF) to 1 million contracts. Position limits are established to prevent any single investor from holding an excessive number of option contracts on the same stock, thereby mitigating the risk of manipulative practices that could influence prices.
The Nasdaq's filing, submitted on November 13, requests an increase in the BlackRock ETF limit from the current 250,000 contracts to 1 million. This adjustment is driven by a significant and ongoing surge in demand for IBIT. The exchange argues that the existing lower limit impedes trading activity and hinders investors from employing effective hedging vehicles or income-generating strategies.
Vincent Liu, Chief Investment Officer at quantitative trading firm Kronos Research, commented that the SEC is likely to approve the proposal, characterizing such adjustments as routine once an asset demonstrates substantial trading volume. Liu anticipates that an approval would lead to deeper order books, tighter spreads, and a more efficient options market.
"Super-sizing IBIT option limits is a straight win for liquidity, allowing bigger traders to let real size flow without friction. More depth, tighter spreads, and cleaner markets follow when constraints come off."
Crypto Derivatives Reach Institutional Scale
Previously, Nasdaq filed in January to raise the limit from 25,000 to 250,000 contracts. This prior increase was made because the volume was well above the 100 million shares trading volume minimum required for qualification.
Liu further noted that this current initiative by Nasdaq to "super-size IBIT option limits" signifies a maturation of Bitcoin markets. He believes that increased limits will enable larger players to hedge positions, scale up their investments, and improve price discovery, indicating a shift for crypto derivatives from a niche market to a more essential component of financial markets.
"Higher limits will spark a short-term pop in volatility. With more room to warehouse risk and hedge cleanly, liquidity stops gapping and starts acting like a true institutional venue with calmer books, better fills, and flow that compounds instead of fragments."
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Adam Livingston, a Bitcoin (BTC) analyst and author, remarked in a series of posts on X that Nasdaq's proposal elevates BlackRock's Bitcoin ETF to the same tier as highly liquid equities like Apple and Microsoft. He stated that this move reflects the market's recognition of Bitcoin as a mega-cap asset, irrespective of regulatory perspectives.
Livingston further elaborated that this development signifies Bitcoin's transition from a novel decentralized experiment to a fully integrated and regulated asset class, complete with institutional-grade derivatives. He emphasized that such a substantial increase in options scaling, a 40x jump, indicates an anticipation of significant demand.