Nasdaq ISE Seeks SEC Approval to Lift Bitcoin ETF Options Limits to One Million Contracts

• Nasdaq said that higher limits would enable market makers to hedge larger institutional flows.
• Analysts say the proposal could support the growth of structured Bitcoin-linked products.

In their recent filing with the U.S. Securities and Exchange Commission, the Nasdaq International Securities Exchange (ISE) has requested to increase the position limits on options contracts tied to the BlackRock Bitcoin ETF (IBIT). The exchange submitted its filing on November 26, requesting a four-time jump by raising the cap from 250,000 contracts to one million.

The exchange asked the SEC to reclassify the iShares Bitcoin Trust options into the same derivatives tier as major equity indexes and large-cap stocks such as Apple, NVIDIA, the S&P 500, and the Nasdaq-100. ISE argued that the current limits restrict trading and hedging strategies and no longer reflect the product’s size or liquidity. BlackRock’s iShares Bitcoin Trust is now the largest Bitcoin ETF by assets.

According to the filing, a fully exercised one-million-contract position would represent around 7.5% of the fund’s float and 0.284% of all bitcoin in circulation.

The proposal states that higher limits would allow market makers to hedge larger institutional flows, including those from pension funds and hedge funds. At present, dealers face constraints in managing delta, gamma, and vega exposures on sizable trades.

Market data shows the iShares Bitcoin Trust has surpassed Deribit as the leading venue for Bitcoin options open interest this year, marking a shift in price discovery toward regulated U.S. exchanges. Thus, banking giant JPMorgan also introduced structured notes that take a bet on iShares Bitcoin Trust ETF (IBIT), as reported earlier this week.

At the same time, IBIT liquidity continues to deepen with the third major expansion over the past month. Market experts see this as a major indicator highlighting strong institutional demand.

Impact on Structure Products and Market Activity

Industry analysts believe expanded position limits could accelerate the development of structured financial products offering Bitcoin exposure, such as capital-protected baskets and yield-oriented instruments.
However, regulatory hurdles, including Staff Accounting Bulletin 121, remain obstacles for traditional institutions seeking to custody digital assets.

The filing also seeks the removal of limits on customized, physically delivered FLEX options. This change would allow large block trades to move from over-the-counter swaps into exchange-listed formats.

Market structure experts note that while broader limits can tighten bid-ask spreads, they may also heighten volatility during rapid price swings if dealers must quickly hedge large gamma exposures.

The SEC has not provided a decision timeline. As with other exchange rule changes, the proposal will undergo a public comment period before the agency issues a ruling.