[Federal Register Volume 90, Number 162 (Monday, August 25, 2025)]
[Notices]
[Pages 41431-41436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-16178]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103746; File No. SR-NYSEAMER-2025-50]
Self-Regulatory Organizations; NYSE American LLC; Notice of
Filing and Immediate Effectiveness of Proposed Change To Amend Rule 904
August 20, 2025.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on August 15, 2025, NYSE American LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 904 (Position Limits) regarding
the position limits for options on iShares Bitcoin Trust ETF
(``IBIT''). The proposed rule change is available on the Exchange's
website at www.nyse.com, at the principal office of the Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 904 (Position Limits) regarding
the position limits for options on IBIT. Specifically, the proposed
rule change amends Rule 904, Commentary .07(f) to delete the 25,000-
contract position limit on IBIT options. As a result, the position
limits for IBIT options would be determined in accordance with Rule
904, Commentary .07(a)-(e) and be based on trading in IBIT during the
most-recent six-month period.\4\ This is a competitive filing based on
a substantially identical proposal submitted by Nasdaq ISE, LLC
(``ISE'') and approved by the Securities and Exchange Commission
(``Commission'').\5\
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\4\ Pursuant to Rule 905(a)(i), the exercise limits for IBIT
options are equivalent to the position limits prescribed for such
options in current Rule 904. Therefore, currently, the exercise
limit for IBIT options is 25,000 contracts. The proposed rule change
would modify the exercise limit for IBIT options to be equivalent to
the position limit prescribed in Rule 904, Commentary .07 (which may
be 25,000, 50,000, 75,000, 200,000, or 250,000, depending on the
six-month trading volume or the six-month trading volume and
outstanding shares of IBIT). See Rule 904, Commentary .07(a)-(e).
\5\ See Securities Exchange Act Release No. 103564 (July 29,
2025), 90 FR 36229 (August 1, 2025) (SR-ISE-2024-62) (Order
Approving a Proposed Rule Change, as Modified by Amendment Nos. 2
and 3, Regarding Position and Exercise Limits for Options on the
iShares Bitcoin Trust ETF) (``ISE Approval Order'').
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IBIT is an Exchange-Traded Fund (``ETF'') that holds bitcoin and is
listed on The Nasdaq Stock Market LLC.\6\ In September 2024, ISE
received approval to list options on IBIT.\7\ On November 25, 2024, the
Commission noticed the Exchange's filing and immediate effectiveness of
a proposed rule change to list and trade IBIT options.\8\ The position
and exercise limits for IBIT options are 25,000 contracts as set forth
in Rule 904, Commentary .07(f), the lowest limit available in equity
options.\9\
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\6\ Nasdaq received approval to list and trade Bitcoin-Based
Commodity-Based Trust Shares in IBIT pursuant to Rule 5711(d) of
Nasdaq. See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (SR-NASDAQ-2023-016) (Order
Granting Accelerated Approval of Proposed Rule Changes, as Modified
by Amendments Thereto, To List and Trade Bitcoin-Based Commodity-
Based Trust Shares and Trust Units). IBIT started trading on January
11, 2024.
\7\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Notice
of Filing of Amendment Nos. 4 and 5 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1,
4, and 5, To Permit the Listing and Trading of Options on the
iShares Bitcoin Trust) (``IBIT Options Approval Order''). ISE began
trading IBIT options on November 19, 2024.
\8\ See Securities Exchange Act Release No. 101737 (November 25,
2024), 89 FR 95257 (December 2, 2024) (SR-NYSEAMER-2024-73).
\9\ See Rule 904, Commentary .07(e) and Rule 905(a)(i).
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Per the Commission ``rules regarding position and exercise limits
are intended to prevent the establishment of options positions that can
be used or might create incentives to manipulate or
[[Page 41432]]
disrupt the underlying market so as to benefit the options positions.''
\10\ For this reason, the Commission requires that ``position and
exercise limits must be sufficient to prevent investors from disrupting
the market for the underlying security by acquiring and exercising a
number of options contracts disproportionate to the deliverable supply
and average trading volume of the underlying security.'' \11\ Based on
its review and analysis of IBIT data, the Commission concluded that the
25,000-contract position limit for IBIT options satisfied these
objectives.\12\
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\10\ See IBIT Options Approval Order, 89 FR, at 78946.
\11\ See id.
\12\ See id.
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While the Exchange proposed a 25,000-contract position limit in its
rule filing to list and trade IBIT options, it nonetheless believes
that evidence existed to support a much higher position limit.
Specifically, when the Commission approved ISE's proposal to permit the
listing and trading of IBIT options, it considered and reviewed ISE's
data analysis that the exercisable risk associated with a position
limit of 25,000 contracts represented only 0.4% of the outstanding
shares of IBIT.\13\ The Commission stated that it also considered and
reviewed ISE's statement that with a position limit of 25,000 contracts
on the same side of the market for IBIT options and 611,040,000 shares
of IBIT outstanding, 244 market participants would have to
simultaneously exercise their positions to place IBIT under stress.\14\
Based on this review, the Commission concluded that the 25,000-contract
position and exercise limit for IBIT options were designed to prevent
investors from disrupting the market for the underlying security by
acquiring and exercising a number of options contracts disproportionate
to the deliverable supply and average trading volume of the underlying
security, and to prevent the establishment of options positions that
can be used or might create incentives to manipulate or disrupt the
underlying market so as to benefit the options position.\15\
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\13\ See id. (data as of August 12, 2024).
\14\ See id.
\15\ See id.
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IBIT currently qualifies for a 250,000-limit on same-side contracts
pursuant to Rule 904, Commentary .07(a)(i), which requires that trading
volume for the underlying security in the most-recent six months be at
least 100 million shares.\16\ As of November 25, 2024, the market
capitalization for IBIT was $46,783,480,800 \17\ with an average daily
volume (``ADV''), for the preceding three months prior to November 25,
2024, of 39,421,877 shares. Therefore, IBIT is well-above the requisite
100 million shares necessary to qualify for the 250,000-contract
position and exercise limit. Also, as of November 25, 2024, there were
19,787,762 bitcoins in circulation.\18\ At a price of $94,830 per
bitcoin,\19\ that equates to a market capitalization of greater than
$1.876 trillion. If a position limit of 250,000 contracts were
considered, the exercisable risk would represent 2.89% \20\ of IBIT
shares outstanding. Given IBIT's liquidity, the current 25,000-contract
position and exercise limit on IBIT options is extremely conservative.
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\16\ Rule 904, Commentary .07(a) provides that to be eligible
for the 250,000-contract limit, either (i) the most recent six-month
trading volume of the underlying security must have totaled at least
100,000,000 shares or (ii) the most recent six-month trading volume
of the underlying security must have totaled at least 75,000,000
shares and the underlying must have at least 300,000,000 shares
currently outstanding.
\17\ The market capitalization was determined by multiplying a
settlement price of ($54.02) by the number of shares outstanding
(866,040,000). This figure was acquired as of November 25, 2024. See
https://www.ishares.com/us/products/333011/ishares-bitcoin-trust-etf.
\18\ See https://www.coingecko.com/en/coins/bitcoin.
\19\ This is the approximate price of bitcoin from 4:00 p.m. ET
on November 25, 2024.
\20\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/866,040,000 shares
outstanding).
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As noted above, position and exercise limits are designed to limit
the number of options contracts traded on an exchange in an underlying
security that an investor, acting alone or in concert with others
directly or indirectly, may control. These limits, which are described
in Rules 904 and 905, are intended to address potential manipulative
schemes and adverse market impacts surrounding the use of options, such
as disrupting the market in the security underlying the options.
Position and exercise limits must balance concerns regarding mitigating
potential manipulation and the cost of inhibiting potential hedging
activity that could be used for legitimate economic purposes.
To achieve this balance, the Exchange proposes to remove IBIT (and
the associated 25,000-contract limit) from the table of position limits
in Commentary .07(f), which would enable IBIT options to trade in the
same manner as options on other ETFs not included in this
Commentary.\21\ Specifically, this proposal would result in an
increased position and exercise limit for IBIT options from 25,000 to
250,000 same-side contacts, pursuant to Commentary .07(a)(i). In
addition, like options on other ETFs not listed in Commentary .07(f),
position limits for IBIT options would be subject to subsequent six-
month reviews to determine future position and exercise limits.\22\
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\21\ See proposed Rule 904, Commentary .07(f). The Exchange
notes that the ETFs included in Commentary .07(f) (other than
certain ETFs like IBIT that hold bitcoin) have significantly higher
position limits than are authorized by Rule, which increases were
subject to Exchange rule filings.
\22\ See Rule 904, Commentary .07(e) and Rule 905(a)(i).
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With respect to IBIT options, in its filing proposing to amend the
position and exercise limits for IBIT options, ISE considered IBIT's
market capitalization and ADV measured against those of other
underlying securities, as well as the position limit of 250,000
contracts in relation to the position limits of other options.\23\ In
measuring IBIT against other securities, ISE aggregated market
capitalization and volume data for securities that have defined
position limits utilizing data from The Options Clearing Corporations
(``OCC'').\24\ This pool of data took into consideration 3,897 options
on single stock securities, excluding broad-based ETFs.\25\ Next, ISE
aggregated the data based on market capitalization and ADV and grouped
option symbols by position limit utilizing statistical thresholds for
ADV, based on 90 days, and market capitalization that were one standard
deviation above the mean for each position limit category (i.e.,
25,000, 50,000 to 65,000, 75,000, 100,000 to less than 250,000, and
250,000).\26\ Rule 904 sets out position limits for various contracts.
For example, on the Exchange, like ISE, a 25,000-contract position
limit applies to options with an underlying security that does not meet
the requirements for a higher options contract position limit.\27\ ISE
performed an exercise to demonstrate the IBIT options position limit
relative to other options symbols in terms of market capitalization and
ADV. For reference, the market capitalization for IBIT was
[[Page 41433]]
$46,783,480,800 \28\ with an ADV, for the preceding three months prior
to November 25, 2024, of 39,421,877 shares. By comparison, ISE
determined that if IBIT were compared to the 1,934 stocks underlying
options that have position limits of 250,000 contracts (and less than
500,000 contracts), IBIT would rank in the 88th percentile for market
capitalization and the 99th percentile for ADV.
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\23\ See ISE Approval Order, 90 FR, at 13233, 13235-37.
\24\ The computations are based on OCC data from November 25,
2024. Data displaying zero values in market capitalization or ADV
were removed.
\25\ IBIT has one asset and therefore is not comparable to a
broad-based ETF where there are typically multiple components.
\26\ The Exchange notes that position limits may also be higher
due to corporate actions in the underlying equities, such as a stock
split. See https://www.theocc.com/market-data/market-data-reports/series-and-trading-data/position-limits. As a result, ISE's pool of
data considered higher position limits than 250,000 contracts, where
applicable.
\27\ See Rule 904, Commentary .07(e).
\28\ The market capitalization was determined by multiplying a
settlement price of ($54.02) by the number of shares outstanding
(866,040,000). This figure was acquired as of November 25, 2024. See
https://www.ishares.com/us/products/333011/ishares-bitcoin-trust-etf.
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ISE also analyzed a position limit of 250,000 contracts for IBIT by
regressing the market capitalization figures and 90-day ADV of all non-
ETF equities, against their respective position limit figures. From
this regression, ISE indicated it determined the implied coefficients
to create a formulaic method for determining an appropriate position
limit. In this case, the modeled position limit was 565,796
contracts.\29\ Based on this analysis, the Exchange believes the
proposed rule change that would result in a 250,000-contract position
and exercise limit for IBIT is appropriate.
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\29\ ISE stated it utilized this formula to arrive at the number
of contracts: ((46,783,380,800 mkt cap * 0.0000002630 market cap
coefficient) + (39,421,877 ADV * 0.0140402219 ADV coefficient)).
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In addition, ISE reviewed IBIT's data relative to the market
capitalization of the entire bitcoin market in terms of exercise risk
and availability of deliverables. As noted above, as of November 25,
2024, there were 19,787,762 bitcoins in circulation.\30\ ISE took a
price of $94,830 per bitcoin,\31\ that equates to a market
capitalization of greater than $1.876 trillion. If a position limit of
250,000 contracts were considered, the exercisable risk would represent
only 2.89% \32\ of the outstanding shares outstanding of IBIT. Since
IBIT has a creation and redemption process managed through the issuer
(whereby bitcoin is used to create IBIT shares), the position sought
limit can be compared to the total market capitalization of the entire
bitcoin market, and in that case, ISE determined that the exercisable
risk for options on IBIT would represent less than 0.072% of all
bitcoin outstanding.\33\ Assuming a scenario where all options on IBIT
shares were exercised given a 250,000-contract position and exercise
limit, this would have a virtually unnoticed impact on the entire
bitcoin market. This ISE analysis demonstrates that a 250,000-contract
position (and exercise) limit for IBIT options is appropriate given its
liquidity.
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\30\ See https://www.coingecko.com/en/coins/bitcoin.
\31\ This is the approximate price of bitcoin from 4:00 p.m. ET
on November 25, 2024.
\32\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/866,040,000 shares
outstanding).
\33\ This number was arrived at with this calculation: ((250,000
limit * 100 shares per option * $54.02 settle)/(19,787,762 Bitcoin
outstanding * $94,830 Bitcoin price)).
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Next, ISE reviewed a position (and exercise) limit of 250,000-
contracts for IBIT options by comparing it to position limits for
derivative products regulated by the Commodity Futures Trading
Commission (``CFTC''). While the CFTC, through the relevant Designated
Contract Markets, only regulates options positions based upon delta
equivalents (creating a less stringent standard), ISE examined
equivalent bitcoin futures position limits. In particular, ISE looked
to the Chicago Mercantile Exchange (``CME'') bitcoin futures
contract,\34\ which has a position limit of 2,000 futures (for the
initial spot month).\35\ On October 22, 2024, CME bitcoin futures
settled at $94,945.\36\ On October 22, 2024, IBIT settled at $54.02,
which would equate to greater than 17,557,898 shares of IBIT if the CME
notional position limit was utilized. Since substantial portions of any
distributed options portfolio are likely to be out of the money on
expiration, an options position limit equivalent to the CME position
limit for bitcoin futures (considering that all options deltas are
<=1.00) should be a bit higher than the CME implied limit of 177,004.
Of note, unlike options contracts, CME position limits are calculated
on a net futures-equivalent basis by contract and include contracts
that aggregate into one or more base contracts according to an
aggregation ratio(s).\37\ If a position exceeds position limits because
of an option assignment, CME permits market participants to liquidate
the excess position within one business day without being considered in
violation of its rules. Additionally, if at the close of trading, a
position that includes options exceeds position limits for futures
contracts, when evaluated using the delta factors as of that day's
close of trading but does not exceed the limits when evaluated using
the previous day's delta factors, then the position shall not
constitute a position limit violation. The Exchange believes ISE's
comparison to CME's position limits on bitcoin futures demonstrates
that a 250,000-contract limit for IBIT options is appropriate.
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\34\ CME Bitcoin Futures are described in Chapter 350 of CME's
Rulebook.
\35\ See the Position Accountability and Reportable Level Table
in the Interpretations & Special Notices Section of Chapter 5 of
CME's Rulebook. Each CME bitcoin futures contract is valued at five
bitcoins as defined by the CME CF Bitcoin Reference Rate (``BRR'').
See CME Rule 35001.
\36\ 2,000 futures at a 5-bitcoin multiplier (per the contract
specifications) equates to $949,450,000 (2000 contracts * 5 BTC per
contract * $94,945 price of November BTC future) of notional value.
\37\ See https://www.cmegroup.com/education/courses/market-regulation/position-limits/position-limits-aggregation-of-contracts-and-table.htm.
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Further, ISE analyzed a position and exercise limit of 250,000 for
IBIT options against other options on ETFs with an underling commodity,
namely SPDR Gold Shares (``GLD''), iShares Silver Trust (``SLV''), and
ProShares Bitcoin ETF (``BITO'').\38\ GLD has a float of 306.1 million
shares and a position limit of 250,000 contracts.\39\ SLV has a float
of 520.7 million shares and a position limit of 250,000 contracts.\40\
BITO has a float of 107.65 million shares and a position limit of
250,000 contracts.\41\ As previously noted, position and exercise
limits are designed to limit the number of options contracts traded on
the exchange in an underlying security that an investor, acting alone
or in concert with others directly or indirectly, may control. A
position limit exercise in GLD would represent 8.17% of the float of
GLD; a position limit exercise in SLV would represent 4.8% of the float
of SLV; and a position limit exercise in BITO would represent 23.22% of
the float of BITO. In comparison, a 250,000-contract position limit in
IBIT would represent only 2.89% of the float of IBIT. Consequently, a
250,000-contract position and exercise limit in IBIT options is more
conservative than the standard applied to GLD, SLV, and BITO, and thus
appropriate.
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\38\ GLD, SLV and BITO each hold one asset in trust similar to
IBIT.
\39\ See https://www.ssga.com/us/en/intermediary/etfs/spdr-gold-shares-gld.
\40\ See https://www.ishares.com/us/products/239855/ishares-silver-trust-fund.
\41\ See https://www.marketwatch.com/investing/fund/bito.
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ISE also noted that IBIT options began trading in penny increments
as of January 2, 2025 pursuant to the Penny Interval Program.\42\ The
Commission
[[Page 41434]]
noted that evidence contained in both the Exchanges' Report and the
Cornerstone analysis demonstrates that the Penny Pilot has benefitted
investors and other market participants in the form of narrower
spreads.\43\ The most actively traded options classes are included in
the Penny Program based on certain objective criteria (trading volume
thresholds and initial price tests). As noted in the Penny Approval
Order, the Penny Program reflects a certain level of trading interest
(either because the class is newly listed or a class that experience a
significant growth in investor interest) to quote in finer trading
increments, which in turn should benefit market participants by
reducing the cost of trading such options.\44\ IBIT options are among a
select group of products that have achieved a certain level of
liquidity that have garnered it the ability to trade in finer
increments. Failing to increase position and exercise limits for IBIT
options, now that it is trading in finer increments, may artificially
inhibit liquidity and create price inefficiency.
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\42\ The Exchange may add to the Penny Program a newly listed
option class provided that (i) it is among the 300 most actively
traded multiply listed option classes, as ranked by National Cleared
Volume at OCC, in its first full calendar month of trading and (ii)
the underlying security is priced below $200 or the underlying index
is at an index level below $200. Any option class added under this
provision will be added on the first trading day of the month after
it qualifies and will remain in the Penny Program for one full
calendar year, after which it will be subject to the Annual Review
described in Rule 960.1NY(d). The Exchange may add any option class
to the Penny Program, provided that (i) it is among the 75 most
actively traded multiply listed option classes, as ranked by
National Cleared Volume at OCC, in the past six full calendar months
of trading and (ii) the underlying security is priced below $200 or
the underlying index is at an index level below $200. Any option
class added under this provision will be added on the first trading
day of the second full month after it qualifies and will remain in
the Penny Program for the rest of the calendar year, after which it
will be subject to the Annual Review as described in Rule
960.1NY(d). See Rule 960.1NY(d).
\43\ See Securities Exchange Act Release No. 88532 (April 1,
2020), 67 FR 19545, 19548 (April 7, 2020) (File No. 4-443) (Joint
Industry Plan; Order Approving Amendment No. 5 to the Plan for the
Purpose of Developing and Implementing Procedures Designed To
Facilitate the Listing and Trading of Standardized Options To Adopt
a Penny Interval Program) (``Penny Approval Order'').
\44\ Id. at 19548.
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The Exchange believes the above information and analysis by ISE
demonstrates that IBIT has more than sufficient liquidity to garner an
increased position and exercise limit of 250,000 same-side contracts.
The Exchange believes that any concerns related to manipulation and
protection of investors are mollified by the significant liquidity
provision in IBIT. The Exchange states that, as a general principle,
increases in active trading volume and deep liquidity of the underlying
securities do not lead to manipulation and/or disruption.
The Exchange believes that allowing IBIT options to have increased
position and exercise limits would lead to a more liquid and
competitive market environment for such options, which will benefit
customers that trade these options. Further, the reporting requirement
for such options would remain unchanged. Thus, the Exchange will still
require that each member that maintains positions in IBIT options on
the same side of the market, for its own account or for the account of
a customer, report certain information to the Exchange. This
information includes, but would not be limited to, the options
positions, whether such positions are hedged and, if so, a description
of the hedge(s). Market Makers \45\ would continue to be exempt from
this reporting requirement, however, the Exchange may access Market
Maker position information.\46\ Moreover, the Exchange's requirement
that members file reports with the Exchange for any customer who held
aggregate large long or short positions on the same side of the market
of 200 or more option contracts of any single class for the previous
day will remain at this level.\47\
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\45\ Per Rule 920NY(a), a Market Maker is an individual who is
registered with the Exchange for the purpose of making transactions
as a dealer-specialist.
\46\ OCC through the Large option Position Reporting (``LOPR'')
system acts as a centralized service provider for ATP Holder
compliance with position reporting requirements by collecting data
from each ATP Holder consolidating the information, and ultimately
providing detailed listings of each ATP Holder's report to the
Exchange, as well as Financial Industry Regulatory Authority, Inc.
(``FINRA''), acting as its agent pursuant to a regulatory services
agreement (``RSA'').
\47\ See Rule 906. Reporting of Options Positions.
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The Exchange also has no reason to believe that the growth in
trading volume in IBIT options will not continue. Rather, the Exchange
expects continued options volume growth in IBIT as opportunities for
investors to participate in the options markets increase and evolve.
The Exchange believes that the current position and exercise limits in
IBIT options are restrictive and will hamper the listed options markets
from being able to compete fairly and effectively with the over-the-
counter (``OTC'') markets. OTC transactions occur through bilateral
agreements, the terms of which are not publicly disclosed to the
marketplace. As such, OTC transactions do not contribute to the price
discovery process on a public exchange or other lit markets. The
Exchange believes that without the proposed changes to position and
exercise limits for IBIT options, market participants will find the
25,000-contract position and exercise limit an impediment to their
business and investment objectives as well as an impediment to
efficient pricing. As a result, market participants may find the less
transparent OTC markets a more attractive alternative to achieve their
investment and hedging objectives, leading to a retreat from the listed
options markets, where trades are subject to reporting requirements and
daily surveillance. The Exchange notes that, consistent with Rules 904
and 905, the position (and exercise) limits for IBIT options would be
reviewed on a six-month basis, as is done for other options
The Exchange represents that its existing trading surveillances are
adequate to monitor trading in IBIT options. Additionally, the Exchange
is a member of the Intermarket Surveillance Group (``ISG'') under the
ISG Agreement. ISG members work together to coordinate surveillance and
investigative information sharing in the stock, options, and futures
markets. In addition to the surveillance that is conducted by the
Exchange's market surveillance staff, the Exchange would also be able
to obtain information regarding trading in shares of IBIT on other
exchanges through ISG. In addition, and as referenced above, the
Exchange has a regulatory services agreement with FINRA, pursuant to
which FINRA conducts certain surveillances on behalf of the Exchange.
Further, pursuant to a multi-party 17d-2 joint plan, all options
exchanges allocate regulatory responsibilities to FINRA to conduct
certain options-related market surveillances.\48\
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\48\ Section 19(g)(1) of the Act, among other things, requires
every SRO registered as a national securities exchange or national
securities association to comply with the Act, the rules and
regulations thereunder, and the SRO's own rules, and, absent
reasonable justification or excuse, enforce compliance by its
members and persons associated with its members. See 15 U.S.C.
78q(d)(1) and 17 CFR 240.17d-2. Section 17(d)(1) of the Act allows
the Commission to relieve an SRO of certain responsibilities with
respect to members of the SRO who are also members of another SRO.
Specifically, Section 17(d)(1) allows the Commission to relieve an
SRO of its responsibilities to: (i) receive regulatory reports from
such members; (ii) examine such members for compliance with the Act
and the rules and regulations thereunder, and the rules of the SRO;
or (iii) carry out other specified regulatory responsibilities with
respect to such members.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\49\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\50\
in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and, in
[[Page 41435]]
general, to protect investors and the public interest.
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\49\ 15 U.S.C. 78f(b).
\50\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes the proposed rule change will
remove impediments to and perfect the mechanism of free and open market
and a national market system, and, in general, protect investors and
the public interest, because it will provide market participants with
the ability to more effectively execute their trading and hedging
activities. Also, based on current trading volume, the resulting
increase in the position (and exercise) limits for IBIT options may
allow Market Makers to maintain their liquidity in these options in
amounts commensurate with the continued high consumer demand in IBIT
options. Subjecting IBIT options to the position limits in Rule 904,
Commentary .07 and corresponding exercise limits in Rule 905 may also
encourage other liquidity providers to continue to trade on the
Exchange rather than shift their volume to OTC markets, which will
enhance the process of price discovery conducted on the Exchange
through increased order flow. The Exchange notes the proposed rule
change would further allow institutional investors to utilize IBIT
options for prudent risk management purposes.
In support of the proposed rule change, the Exchange cites the in-
depth analysis ISE performed which, as noted above, considered, among
other things: (1) IBIT's market capitalization and ADV, and a 250,000
contract position and exercise limit in relation to the position limits
of options on other securities; (2) market capitalization of the entire
Bitcoin market in terms of exercise risk and availability of
deliverables; and (3) comparing a 250,000 contract position limit to
position limits for derivative products regulated by the CFTC. Based on
the Exchange's review of these analyses, and consistent with the ISE
Approval Order, the Exchange believes that subjecting IBIT options to
the position (and exercise) limits set forth in Rule 904, Commentary
.07 (which may go up to 250,000 contracts) is more than
appropriate.\51\
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\51\ See ISE Approval Order, 90 FR, at 36231 (concluding that,
based on the Commission's review of the data and analysis provided
by ISE, ``the proposed position and contract limits for IBIT options
``are designed to prevent market participants from disrupting the
market for the underlying securities by acquiring and exercising a
number of options contracts disproportionate to the deliverable
supply and average trading volume of the underlying security, and to
prevent the establishment of options positions that can be used or
might create incentives to manipulate or disrupt the underlying
market so as to benefit the options position.'')
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe the proposed rule change will impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because all market participants would be subject to
the same position and exercise limits for IBIT options. The Exchange
does not believe the proposed rule change will impose any burden on
intermarket competition, and may benefit competition, as the proposed
rule change is identical to ISE's recently-approved rule change.\52\
The Exchange believes that the proposed rule change will also provide
additional opportunities for market participants to continue to
efficiently achieve their investment and trading objectives for equity
options on the Exchange.
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\52\ See ISE Approval Order.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \53\ and Rule 19b-4(f)(6) thereunder.\54\
Because the proposed rule change does not: (i) significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\53\ 15 U.S.C. 78s(b)(3)(A)(iii).
\54\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \55\ under the
Act does not normally become operative prior to 30 days after the date
of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\56\ the
Commission may designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposal may become operative immediately upon filing. The
Commission previously approved the removal of the 25,000 contract
position and exercise limits for IBIT, such that those funds will be
subject to the position and exercise limits as determined for equity
options for which no set limit has been otherwise established on that
exchange.\57\ The Exchange is proposing similarly to remove of the
25,000 contract position and exercise limit for IBIT, such that those
funds will be subject to the position and exercise limits as determined
by the position limit rules at Rule 904. The Exchange has provided
information regarding IBIT, including, among other things, information
regarding trading volume, and the market capitalization of IBIT and
surveillance procedures that will apply. The Commission notes that the
proposal raises no new or novel legal issues and would simply provide
an additional venue for trading IBIT with position and exercise limits
that may be higher than 25,000 contracts. Therefore, the Commission
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby waives the 30-day operative delay and designates the
proposed rule change as operative upon filing.\58\
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\55\ 17 CFR 240.19b-4(f)(6).
\56\ 17 CFR 240.19b-4(f)(6)(iii).
\57\ See ISE Approval Order.
\58\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \59\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\59\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
[[Page 41436]]
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NYSEAMER-2025-50 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEAMER-2025-50. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-NYSEAMER-2025-50 and should be submitted
on or before September 15, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\60\
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\60\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-16178 Filed 8-22-25; 8:45 am]
BILLING CODE 8011-01-P