In a decisive maneuver for institutional crypto adoption, Nasdaq ISE has filed a formal proposal with the Securities and Exchange Commission (SEC) to quadruple the trading capacity of derivatives linked to BlackRock’s Bitcoin ETF. The exchange specifically requested that IBIT options limits be increased from the current 250,000 to one million contracts per side, citing unprecedented demand. According to the Federal Register notice, this request responds to accelerating volume growth and the need for more robust hedging tools for market makers.
The proposal details that the current operating ceiling significantly restricts institutional desks that rely on these instruments for yield strategies and large-scale risk management. By raising the cap to one million contracts, Nasdaq aims to place BlackRock’s product in the same liquidity tier as global equity benchmarks, such as the iShares MSCI Emerging Markets (EEM) and China Large-Cap (FXI) ETFs. This regulatory parity would confirm Bitcoin’s status as a mature asset class fully integrated into Wall Street’s traditional financial rails.
Does this increase pose a real risk to underlying market stability?
To mitigate regulatory concerns, the exchange presented a comprehensive analysis demonstrating that the proposed new capacity is safe relative to the fund’s size. The document argues that even a fully exercised one million contract position would represent just 7.5% of IBIT’s float and a minuscule fraction, 0.284%, of the entire existing Bitcoin supply. Therefore, the risk of market disruption or price manipulation is considered minimal given the massive volume and liquidity already handled by this ETF’s ecosystem.
Furthermore, the filing includes a second critical component: the total removal of position and exercise limits for physically settled FLEX IBIT options. This change would align Bitcoin’s regulatory treatment with established commodities, such as the SPDR Gold Trust (GLD). FLEX options are customized tools widely used by large funds to design specific hedges and structured exposures, suggesting Nasdaq is paving the way for even more sophisticated and voluminous institutional capital entry.
This strategic move arrives at an inflection point, where the regulated U.S. market is rapidly absorbing liquidity previously dominated by offshore platforms. Recent data indicates that open interest in IBIT options has already surpassed that of Deribit, the historical leader in crypto derivatives. This signals a clear capital migration: investors are preferring the security and regulatory clarity of U.S. markets over unregulated alternatives, cementing IBIT as the new epicenter for institutional Bitcoin speculation and hedging.
