Nasdaq wants to increase options limit by 10x for BlackRock's Bitcoin ETF - Today's Gist: Breaking News, Entertainment, and Insights

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Nasdaq wants to increase options limit by 10x for BlackRock’s Bitcoin ETF
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THE Nasdaq proposed increasing position and exercise limits for stock options iShares Bitcoin Trust ETF (IBIT), BlackRock’s Bitcoin ETF. The proposal is to increase from 25,000 to 250,000 contracts.

According to Nasdaq, this increase is justified because the product has grown a lot since its approval by the SEC. Since having the options approved, the Bitcoin ETF has seen its market capitalization jump from US$22.49 billion to US$52.4 billion. Now the search is on align the ETF with other fundssuch as SPDR Gold Shares and iShares Silver Trust.

According to the report signed by SEC Secretary Stephanie J. Fouse, the order concerns position and exercise limits for IBIT options, set at 25,000 contracts, the lowest limit available in options trading.

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The SEC has approved options trading for BlackRock’s iShares Bitcoin Trust ETF (IBIT), imposing a limit of 25,000 contracts per operation. The objective was avoid positions in options that could manipulate or destabilize the underlying market. At the time, IBIT had a market value of US$22.49, and has more than doubled since then.

Accelerated Growth of Bitcoin ETF Drives Increase

Nasdaq’s request also clarifies that, at the end of November 2024, the IBIT had reached a market capitalization of US$46.78 billion and an average daily trading volume of about $39.42 million shares. The product ended the year with a valuation of US$52.4 billion, consolidating the ETF as the fastest growing fund of all time.

Additionally, the higher limits would bring IBIT in line with other ETFs and securities that have higher trading volumes and market capitalizations. To the options on SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) are examples. This is because they have position limits of 250,000 contracts. If Nasdaq has their order accepted, traders will be able to maintain larger positions in IBIT optionsenabling more effective hedging and risk management strategies.

For example, a trader who wants to hedge a position of 1 million IBIT shares could do so more efficiently by holding 4 trades of 250,000 contractsinstead of 40 trades at the same time, as works in the current limit.

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Furthermore, the higher limits must attract more participants to the IBIT options marketleading to tighter bid-ask spreads and better prices for traders.

With more flexibility in options trading, traders have become less likely to turn to over-the-counter (OTC) marketswhich may lack transparency and regulatory oversight.

Furthermore, the proposed increase is based on data showing that a limit of 250,000 contracts would represent only 2.89% of IBIT’s float shareswhich is considered manageable. THE GLD and SLVmentioned, have a float of 8.17% and 4.8%respectively.