Nasdaq Files With SEC to Lift Position Caps on Bitcoin, Ether ETF Options

In a landmark regulatory shift that could affect the cryptocurrency market, Nasdaq has asked the US Securities and Exchange Commission (SEC) to lift restrictions on several BTC and ETH exchange-traded funds (ETFs).

Specifically, it seeks approval to remove the 25,000-contract position and exercise limit restrictions on options trading for the cryptocurrency funds in question.

The change, enacted early last year, fundamentally alters the landscape for institutional crypto derivatives trading.

Consequently, a major financial player now faces significantly fewer constraints when building large-scale positions in these newly mainstream investment vehicles.

The filing with the US SEC, if approved by the US regulator, would impact options on BlackRock’s iShares Bitcoin Trust ETF (IBIT) and its Ethereum ETF counterpart (ETHA).

Grayscale, Bitwise, Fidelity, ARK21Shares, and VanEck ETF options limit will also increase in the long run.

Every crypto ETF will be subject to the standard position limits outlined in the Nasdaq Options Market rules. This will sync them with other existing ETF options.

To bolster its case for removal, Nasdaq noted that the proposal promotes ‘just’ and ‘equitable’ principles of trade. 

Change Cold Affect Institutional Crypto Derivatives Trading

The elimination of these caps removes a key barrier for large institutions, such as hedge funds, asset managers, and proprietary trading firms, seeking to execute sophisticated options strategies on Bitcoin and Ethereum ETFs. 

Now, institutions can scale their exposure more efficiently. Nevertheless, institutions are still stashing the two largest crypto tokens by market capitalization.

BlackRock has been increasing its BTC stash, likely taking advantage of the current selloff.

At the beginning of January, BlackRock added 9,619 Bitcoin, worth about $878 million at the time, and 46,851 Ethereum, worth about $149 million, over three straight days. According to on-chain tracking firm Lookonchain, the combined acquisition was worth roughly $1.03 billion.

In line with related institutional Bitcoin purchases, business intelligence software firm Strategy bought 22,305 BTC for approximately $2.13 billion between Jan. 12 and 19. As a result of this acquisition, the company’s total holdings currently stand at 709,715 BTC.