Nasdaq Seeks to Quadruple Bitcoin ETF Options Limits
The proposed rule change for BlackRock's IBIT signals growing institutional demand for sophisticated crypto trading instruments, despite a recent month of record fund outflows.
Nasdaq is pushing to dramatically expand the trading capacity for options on BlackRock's iShares Bitcoin Trust (IBIT), signaling a significant step toward accommodating larger institutional players in the cryptocurrency market.
In a recent Form 19b-4 filing with the U.S. Securities and Exchange Commission, the exchange operator proposed to quadruple the position limits for options on IBIT, aiming to lift the cap from 250,000 contracts to 1 million. The move is a direct response to what Nasdaq describes as sustained high demand and trading volumes for the largest spot Bitcoin exchange-traded fund, which has become a primary vehicle for institutional crypto exposure since its landmark launch earlier this year.
The proposal comes at a complex moment for the nascent asset class. Spot Bitcoin ETFs just weathered their most challenging month on record, with investors pulling approximately $3.5 billion from the funds in November, according to market data. BlackRock's IBIT itself was not immune, experiencing over $2.4 billion in outflows during the turbulent period. However, inflows showed signs of recovery in the final days of the month, suggesting resilient underlying interest.
By seeking to raise the options limit, Nasdaq is betting on future growth and the increasing sophistication of investors in the space. Larger limits are critical for institutional investors like hedge funds and asset managers who use options for complex hedging, income generation, and large-scale directional bets. The current cap, Nasdaq argues, restricts these activities and may push institutional flow into less transparent over-the-counter (OTC) markets.
"The sustained increase in demand for IBIT... necessitates a larger position limit to enable investors to effectively hedge their portfolios and implement income-generating strategies," Nasdaq stated in its justification. The exchange also noted that expanding the limits would not pose a threat to market stability, given the ETF's substantial market capitalization and deep liquidity.
The SEC issued a notice on November 21, soliciting public comment on the proposed rule change, which is now under review. This is the second time this year that Nasdaq has sought to increase the trading capacity for IBIT options. The exchange successfully lobbied to raise the limit tenfold from 25,000 to 250,000 contracts, a move the SEC approved in July.
Market analysts see the proposed increase as a natural step in the maturation of the Bitcoin ETF ecosystem. Approval would place IBIT in a similar category to some of the most heavily traded and liquid equities, such as Microsoft and Apple, enabling more robust and efficient market-making activities. This, in turn, could lead to tighter bid-ask spreads and deeper liquidity for all participants.
Should the SEC approve the filing, it would further solidify the infrastructure for institutional crypto adoption, providing large-scale traders with the advanced tools they require. The move underscores a broader trend: while retail sentiment can be volatile, the institutional plumbing for digital assets continues to be built out, preparing the market for its next phase of growth.