Two exchanges affiliated with the New York Stock Exchange have taken a significant step in the trading of cryptocurrency options by eliminating the 25,000 contract position limit on options linked to a variety of crypto exchange-traded funds (ETFs). NYSE Arca and NYSE American submitted three rule changes to the Federal Register on March 10, enabling the removal of these contract position limits and associated price discovery restrictions for options related to Bitcoin and Ether ETFs that are listed on their platforms.
The Securities and Exchange Commission (SEC) acknowledged these changes recently, waiving the customary 30-day waiting period for both sets of proposed rules, which means they are now in effect. The initial limits had been imposed when options for crypto ETFs began trading in November 2024, a measure aimed at preventing market manipulation and reducing volatility.
With the removal of these restrictions, the treatment of crypto ETF options aligns more closely with that of traditional commodity ETF options, granting institutional investors greater trading flexibility. This development is poised to enhance liquidity in the market, making it easier for traders to enter and exit positions. Additionally, the changes facilitate the trading of crypto options as FLEX options, which allow for customizable terms such as non-standard strike prices, varied expiration dates, and different exercise styles.
The rule amendments affect a total of 11 crypto ETF options, which include notable products like BlackRock’s iShares Bitcoin Trust (IBIT), Fidelity’s Wise Origin Bitcoin Fund (FBTC), and the ARK 21Shares Bitcoin ETF (ARKB). Other options affected also consist of Bitcoin and Ether ETFs from Bitwise and Grayscale.
In a related development, the SEC previously approved the removal of the 25,000 contract position limit for the Grayscale Bitcoin Trust ETF (GBTC) in late July. Meanwhile, Nasdaq’s options exchange, Nasdaq International Securities Exchange, is currently seeking to increase the contract position limit for BlackRock’s IBIT to 1 million, with that proposed rule change still under review as of a notice from the SEC dated February 27.
