[Federal Register Volume 91, Number 137 (Monday, July 20, 2026)]
[Notices]
[Pages 45294-45299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-14527]
[[Page 45294]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105920; File No. SR-NYSEARCA-2026-76]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule 6.8-O
To Increase Position and Exercise Limits for Options on iShares Bitcoin
Trust ETF
July 15, 2026.
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 July 6, 2026, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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 6.8-O to increase the position
limit and exercise limits \4\ for options on iShares Bitcoin Trust ETF
(``IBIT''). The proposed rule change is available on the Exchange's
website at www.nyse.com and at the principal office of the Exchange.
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\4\ Rule 6.9-O (Exercise Limits) references the position limits
of Rule 6.8-O, therefore, the exercise limits contained in Rule 6.9-
O are not being separately amended.
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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 6.8-O to increase the position
limit, and by extension, the exercise limits for options on IBIT to
1,000,000 contracts. This filing is based on substantially identical
proposals by Nasdaq ISE, LLC (``ISE''), which was approved, and Nasdaq
PHLX Exchange (``PHLX'') and BOX Exchange, which have been noticed for
immediate effectiveness.\5\
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\5\ See Securities Exchange Act Release No. 105317 (April 27,
2026), 91 FR 23333 (April 30, 2026) (SR-ISE-2025-26) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 5, to
Amend the Position and Exercise Limits for IBIT Options) (``ISE
Approval Order''); Securities Exchange Act Release No.105501 (May
18, 2026), 91 FR 30008, (May 21, 2026) (SR-Phlx-2026-29) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Increase the Position and Exercise Limits for Options on iShares
Bitcoin Trust ETF PHLX Notice''); and Securities Exchange Act
Release No. 105520 (May 19, 2026), 91 FR 30340 (May 22, 20260 (SR-
BOX-2026-13) (Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Increase the Position and Exercise Limits
for Options on iShares Bitcoin Trust ETF) (``BOX Notice'').
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Background and Proposed Rule Change
IBIT is an Exchange-Traded Fund (``ETF'') that holds Bitcoin and is
listed on The Nasdaq Stock Market LLC (``Nasdaq'').\6\ On November 22,
2024, the Exchange became authorized to trade and list options on
IBIT.\7\ Options on IBIT are listed on the Exchange pursuant to Rule
5.3.
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\6\ Nasdaq received approval to list and trade 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. 101712 (November 22,
2024), 89 FR 94794 (November 29, 2024) (SR-NYSEARCA-2024-100)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To List and Trade Option Contracts on the iShares Bitcoin
Trust, the Fidelity Wise Origin Bitcoin Fund, and the ARK21Shares
Bitcoin ETF).
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The position limit for IBIT options is set by Rule 6.8-O,
Commentary .06 and then reflected in the exercise limits of Rule 6.9-O.
Pursuant to Rule 6.8-O, Commentary .06, the largest in capitalization
and the most frequently traded stocks and ETFs have an option position
limit of 250,000 contracts (with adjustments for splits, re-
capitalizations, etc.) on the same side of the market; and smaller
capitalization stocks and ETFs have position limits of 200,000, 75,000,
50,000 or 25,000 contracts (with adjustments for splits,
recapitalizations, etc.) on the same side of the market. IBIT currently
qualifies for a 250,000-contract position limit.
The Exchange proposes to increase the position limit and exercise
limit for options on IBIT to 1,000,000 contracts by adding the proposed
position limit in Rule 6.8-O, which then reflects the exercise limits
in Rule 6.9-O. The Exchange's proposal is substantially similar, in all
material respects, to the recent proposals by ISE, PHLX and BOX to
increase the position and exercise limits for options on IBIT to
1,000,000 contracts on the same side of the market.\8\ In addition, the
proposed position and exercise limits for options on IBIT are
consistent with existing position and exercise limits for options on
iShares Russell 2000 ETF, iShares MSCI Emerging Markets, iShares China
Large-Cap ETF and iShares MSCI EAFE ETF.\9\
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\8\ ISE Approval Order, PHLX Notice and BOX Notice, supra Note
5.
\9\ See Rule 6.8-O, Commentary .06(f).
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Composition and Growth Analysis for Underlying ETFs
Position limits, 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. These limits 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. The Commission has recognized that these
limits are designed to prevent the establishment of options positions
that can be used to manipulate or disrupt the underlying market, as
well as serve to reduce the possibility for disruption of the options
market itself, especially in illiquid classes.\10\
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\10\ See Securities Exchange Act Release No. 103567 (July 29,
2025), 90 FR 36253, 36255 (August 1, 2025) (SR-NYSEARCA-2025-07)
(Order Approving a Proposed Rule Change, as Modified by Amendment
No. 3, To Amend Rules Regarding Position and Exercise Limits for
Options on the Grayscale Bitcoin Trust (``GBTC'') and To Permit
Flexible Exchange Options on GBTC).
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Per the Commission, ``[o]ptions position and exercise limits are
intended 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
[[Page 45295]]
benefit the options positions.'' \11\ 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.'' \12\
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\11\ ISE Approval Order at 23334, supra Note 5.
\12\ Id.
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The Exchange has observed an ongoing increase in demand in options
on IBIT in 2025.\13\ The Exchange believes the current position limit
and exercise limit of 250,000 contracts (the highest position limit
available pursuant to Rule 6.8-O and exercise limit pursuant to Rule
6.9-O) will impede trading activity and strategies of investors, such
as use of effective hedging vehicles or income generating strategies
(e.g., buy-write or put-write), and the ability of Market Makers to
make liquid markets with tighter spreads in IBIT options.
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\13\ In 2025, the Exchange filed a rule proposal to eliminate
the 25,000-contract position and exercise limits for IBIT options
and apply the position and exercise limits in Rules 6.8-O and 6.9-O.
See Securities Exchange Act Release No. 103751 (August 20, 2025), 90
FR 41462 (August 25, 2025) (SR-NYSEARCA-2025-590) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rule
6.8-O).
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The Exchange believes that increasing the position limit and
exercise limit for options on IBIT to 1,000,000 contracts would enable
liquidity providers to provide additional liquidity to the Exchange, as
well as other options exchanges on which they participate. As described
in further detail below, the Exchange believes that the continuously
increasing market capitalization of IBIT options, as well as the highly
liquid markets for those securities, reduces the concerns for potential
market manipulation and/or disruption in the underlying markets upon
increasing position limits, while the rising demand for trading options
on IBIT for legitimate economic purposes compels an increase in
position limits (and corresponding exercise limits).
IBIT currently qualifies for a 250,000 contract position limit
pursuant to the criteria in Rule 6.8-O, Commentary .06, which requires
that, for the most recent six-month period, trading volume for the
underlying security be at least 100 million shares.\14\ In their
proposals to increase the position limit for IBIT to 1,000,000, ISE
PHLX and BOX noted that, as of February 11, 2026, the market
capitalization for IBIT was 52,661,063,818 \15\ with an average daily
volume (``ADV''), for the preceding six months prior to February 11,
2026, of 61,803,035 shares. By comparison, on the same day, the iShares
MSCI Emerging Markets (``EEM'') had an ADV of 29,459,889 shares and an
AUM of 27,761,941,292 the iShares China Large-Cap ETF (``FXI'') had an
ADV of 31,656,532 and an AUM of 6,594,337,253; and the iShares MSCI
EAFE ETF (``EFA'') had an ADV of 17,215,037 shares and an AUM of
76,788,457,200.\16\
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\14\ Rule 6.8-O, Commentary .06(e) provides that, to be eligible
for the 250,000 option contract limit, either the most recent six
(6) month trading volume of the underlying security must have
totaled at least 100 million shares or the most recent six-month
trading volume of the underlying security must have totaled at least
seventy-five (75) million shares and the underlying security must
have at least 300 million shares currently outstanding.
\15\ The market capitalization was determined by multiplying a
Net Asset Value of $38.29 by the number of shares outstanding
1,337,920,000 This figure was acquired as of February 11, 2026. See
https://www.ishares.com/us/products/333011/ishares-Bitcoin-trust-etf.
\16\ ISE Approval Order, PHLX Notice and BOX Notice, supra note
5.
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ISE performed additional analysis with respect to IBIT. First, ISE
considered IBIT's market capitalization and ADV and prospective
position limit in relation to other securities. 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'').\17\ This pool of
data took into consideration 3,797 options on single stock securities,
excluding broad based ETFs.\18\ Next, ISE aggregated the data based on
market capitalization and ADV and grouped by option symbol and position
limit utilizing statistical thresholds for ADV, based on 180 days, and
market capitalization that were one standard deviation \19\ above the
mean for each position limit category (i.e. 25,000, 50,000 to 52,000,
75,000, 200,000, 250,000 to 375,000, 450,000 to 650,000, 750,000 to
1,250,000 and, and greater than or equal to 2,000,000).\20\ This
exercise was performed to demonstrate IBIT's position limit relative to
other options symbols in terms of market capitalization and ADV. For
reference, the market capitalization for IBIT was $52,661,063,818 with
an ADV, for the preceding 180 days prior to February 11, 2026, of
61,803,035 shares.
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\17\ ISE Approval Order, supra note 5. The computations are
based on OCC data from February 11, 2026.
\18\ IBIT has one asset and therefore is not comparable to a
broad-based ETF where there are typically multiple components.
\19\ The standard deviation added limited utility to the
analysis given the heavily skewed distribution of market
capitalizations in the single stock securities.
\20\ These buckets are based on OCC's current positions limits.
See https://www.theocc.com/market-data/market-data-reports/series-and-trading-data/position-limits. Rule 6.8-O sets out position
limits for various contracts. For example, a 25,000-contract limit
applies to those options having an underlying security that does not
meet the requirements for a higher options contract limit. The
Exchange notes that position limits may also be higher due to
corporate actions in the underlying equities, such as a stock split.
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As set forth in the ISE Approval Order, as of February 11, 2026, if
IBIT were compared to the 10 stocks that have position limits of
750,000 contracts to 1.25 million contracts it would rank in the 45th
percentile for market capitalization and the 89th percentile for ADV.
ISE also analyzed the position limits for IBIT by regressing the median
elements from each bucket of market capitalization and 180-day ADV of
all non-ETF equities, against their respective position limit figures.
From this regression, ISE was able to determine the implied
coefficients to create a formulaic method for determining an
appropriate position limit.\21\
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\21\ ISE utilized Excel's Data Analysis Package to model the
position limit.
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ISE utilized a linear model approach which incorporated the median
metric from each bucket given the data at both the lower end of each
position limit bucket and the higher end of each position limit bucket
could be considered significant outliers, thereby skewing the results.
ISE utilized IBIT's market capitalization of $52,661,063,818 to
arrive at a modeled position limit of 1,707,654. Additionally, ISE
utilized IBIT's ADV of 61,803,035 to arrive at a modeled position limit
of 5,672,081. Based on the aforementioned analysis, the Exchange
believes that the proposed 1,000,000 contracts position and exercise
limit is appropriate.
Second, as set for in the ISE Approval Order, ISE reviewed IBIT's
data relative to the market capitalization of the entire Bitcoin market
in terms of exercise risk and availability of deliverables. According
to ISE, as of February 11, 2026, there were approximately 20.5 million
Bitcoins in circulation. At a price of $66,938,\22\ that equated to a
market capitalization of greater than $1.374 trillion. If a position
limit of 1,000,000 contracts were considered, the exercisable risk
would represent 7.474%\23\ of the outstanding shares of IBIT. Since
IBIT has a creation and redemption process managed through
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the issuer, the position limit can be compared to the total market
capitalization of the entire Bitcoin market and in that case, the
exercisable risk for options on IBIT would represent 0.278% of all
Bitcoin outstanding.\24\ Assuming a scenario where all options on IBIT
shares were exercised given the proposed 1,000,000-contract position
limit (and exercise limit), this would have a virtually unnoticed
impact on the entire Bitcoin market. This analysis demonstrates that
the proposed 1,000,000 per same side position and exercise limit is
appropriate for options on IBIT given its liquidity.
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\22\ This was the approximate price of Bitcoin on February 11,
2026.
\23\ This percentage is arrived at with this equation:
(1,000,000 contract limit * 100 share per option/1,337,920,000
shares outstanding).
\24\ This number was arrived at with this calculation:
(1,000,000 limit * 100 shares per option * $38.29 IBIT NAV)/
(20,528,687 BTC outstanding * $66,938 BTC price).
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Third, as set forth in the ISE Approval Order, ISE reviewed the
proposed position limit 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. Specifically, ISE looked at
the CME bitcoin futures contract \25\ that has a position limit of
2,000 futures.\26\
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\25\ CME Bitcoin Futures are described in Chapter 350 of CME's
Rulebook.
\26\ See the Position Accountability and Reportable Level Table
in the Interpretations & Special Notices Section of Chapter 5 of
CME's Rulebook.
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On February 11, 2026, CME bitcoin futures settled at
$677,150,406.33.\27\ On February 11, 2026, IBIT settled at $38.29,
which would equate to greater than 17,684,774 shares of IBIT if the CME
notional position limit was utilized. Since substantial portions of any
distributed options portfolio is 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 176,848 limit. 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).\28\ Therefore, if a portfolio includes positions in options
on futures, CME would aggregate those positions into the underlying
futures contracts in accordance with a table published by CME on a
delta equivalent value for the relevant spot month, subsequent spot
month, single month and all month position limits.\29\ 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. Based on the aforementioned analysis, the Exchange believes
that the proposed 1,000,000 contracts position and exercise limit is
appropriate.
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\27\ 2,000 futures at a 5 bitcoin multiplier (per the contract
specifications) equates to $677,150,000 (2,000 contracts * 5 BTC per
contract * $67,715 price of February BTC future) of notional value.
\28\ See https://www.cmegroup.com/education/courses/market-regulation/position-limits/position-limits-aggregation-of-contracts-and-table.html.
\29\ Id.
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Fourth, as noted in the ISE Approval Order, ISE analyzed a position
limit and exercise limit of 1,000,000 for IBIT options against other
options on ETFs with an underlying commodity, namely SPDR Gold Shares
(``GLD''), iShares Silver Trust (``SLV''), and ProShares Bitcoin ETF
(``BITO'').\30\ At the time of ISE's analysis, GLD had a float of 377
million shares \31\ and a position limit of 250,000 contract. SLV had a
float of 552 million shares,\32\ and a position limit of 250,000
contracts. Finally, BITO had 200.89 million shares outstanding \33\ and
a position limit of 250,000 contracts. As previously noted, position
limits 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 6.63% of the float of GLD; a position limit exercise in SLV
would represent 4.53% of the float of SLV, and position limit exercise
of BITO would represent 12.44% of the float of BITO. In comparison, a
1,000,000-contract position limit in IBIT options would represent
7.474%\34\ of the float of IBIT. Consequently, the 1,000,000 proposed
IBIT options position and exercise limit is more conservative than the
standard applied to GLD, SLV and BITO, and appropriate.
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\30\ GLD, SLV and BITO each hold one asset in trust like IBIT.
\31\ GLD currently has a float of 360 million shares. See
https://www.ssga.com/us/en/intermediary/etfs/spdr-gold-shares-gld.
\32\ SLV currently has a float of 534 million shares. See
https://www.ishares.com/us/products/239855/ishares-silver-trust-fund.
\33\ BITO currently has 169.53 million shares outstanding. See
https://www.marketwatch.com/investing/fund/bito.
\34\ This percentage was arrived at with this equation:
(1,000,000 contract limit * 100 share per option/1,337,920,000
shares outstanding). This information was captured on February 11,
2026.
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Fifth, as set forth in the ISE Approval Order, ISE noted that IBIT
began trading in penny increments as of January 2, 2025 pursuant to the
Penny Interval Program.\35\ The Commission noted that evidence and
analysis provided in connection with the Penny Pilot demonstrated that
the Pilot benefited investors and other market participants in the form
of narrower spreads.\36\ 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
experienced 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.\37\ IBIT
options is 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. The
Exchange notes that options on iShares MSCI Emerging Markets, iShares
China Large-Cap ETF and iShares MSCI EAFE ETF also trade in penny
increments based on their liquidity.
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\35\ See Rule 6.72A-O.
\36\ See Securities Exchange Act Release No. 88532 (April 1,
2020), 85 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'').
\37\ Id at 19548.
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The Exchange believes that IBIT options have more than sufficient
liquidity to garner an increased position and exercise limit of
1,000,000 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 increasing the position (and exercise)
limits for
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IBIT options would lead to a more liquid and competitive market
environment for IBIT 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
participant that maintains positions in impacted 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 would continue to be exempt from this reporting
requirement, however, the Exchange may access Market Maker position
information.\38\ Moreover, the Exchange's requirement that OTP Holders
and OTP Firms 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 and will continue to serve as an
important part of the Exchange's surveillance efforts.\39\
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\38\ OCC through the Large Option Position Reporting (``LOPR'')
system acts as a centralized service provider for Participant
compliance with position reporting requirements by collecting data
from each Participant, consolidating the information, and ultimately
providing detailed listings of each Participant'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'').
\39\ See Rule 6.6-O.
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The Exchange also has no reason to believe that the growth in
trading volume in IBIT 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 250,000-contract position
limit an impediment to their business and investment objectives as well
as an impediment to efficient pricing. As such, 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 believes that the existing surveillance procedures and
reporting requirements at the Exchange are capable of properly
identifying disruptive and/or manipulative trading activity. The
Exchange also represents that it has adequate surveillances in place to
detect potential manipulation, as well as reviews in place to identify
continued compliance with the Exchange's listing standards. These
procedures monitor market activity via automated surveillance
techniques to identify unusual activity in both options and the
underlyings, as applicable. The Exchange also notes that large stock
holdings must be disclosed to the Commission by way of Schedules 13D or
13G,\40\ which are used to report ownership of stock which exceeds 5%
of a company's total stock issue and may assist in providing
information in monitoring for any potential manipulative schemes.
Further, the Exchange believes that the current financial requirements
imposed by the Exchange and by the Commission adequately address
concerns regarding potentially large, unhedged positions in equity
options. Current margin and risk-based haircut methodologies serve to
limit the size of positions maintained by any one account by increasing
the margin and/or capital that an OTP Holder or OTP Firm must maintain
for a large position held by itself or by its customer.\41\ In
addition, Rule 15c3-1 \42\ imposes a capital charge on participants to
the extent of any margin deficiency resulting from the higher margin
requirement.
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\40\ 17 CFR 240.13d-1.
\41\ See Section 3. Margins.
\42\ 17 CFR 240.15c3-1
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\43\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\44\ in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and, in general, to
protect investors and the public interest. In addition, the Exchange
believes that the proposed rule change is consistent with the Section
6(b)(5) \45\ requirement that the rules of an exchange not be designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\43\ 15 U.S.C. 78f(b).
\44\ 15 U.S.C. 78f(b)(5).
\45\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that increasing the position limit and
exercise limit for options on IBIT to 1,000,000 contracts is consistent
with the Act. This proposal will remove impediments to and perfect the
mechanism of a 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. The increased position and
exercise limits 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. Further, this proposal would
allow institutional investors to utilize IBIT options for prudent risk
management purposes.
In addition, the Exchange believes that the current liquidity in
IBIT will continue to mitigate concerns regarding potential
manipulation of IBIT options and/or disruption of IBIT upon amending
the table of position limits in Rule 6.8-O, Commentary .06(f). ISE
compared IBIT's data relative to the market capitalization of the
entire Bitcoin market in terms of exercise risk and availability of
deliverables and concluded that if a position limit of 1,000,000
contracts were considered, the exercisable risk would represent 7.474%
\46\ of the 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 limit can be compared to the total
market capitalization of the entire Bitcoin market and in that case,
the exercisable
[[Page 45298]]
risk for options on IBIT would represent less than 0.278% of all
Bitcoin outstanding.\47\ This analysis demonstrated that a 1,000,000
contracts position and exercise limits would be appropriate.
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\46\ This percentage is arrived at with this equation:
(1,000,000 contract limit * 100 share per option/1,337,920,000
shares outstanding). This information was captured on February 11,
2026.
\47\ This number was arrived at with this calculation:
(1,000,000 limit * 100 shares per option * $38.29 IBIT NAV)/
(20,528,687 BTC outstanding * $66,938 BTC price).
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Comparing a position limit of 1,000,000 for IBIT options against
other options on ETFs with an underlying commodity, namely GLD, SLV and
BITO, a position limit exercise in GLD represents 6.63% of the float of
GLD, a position limit exercise in SLV represents 4.53% of the float of
SLV, and a position limit exercise of BITO represents 12.44% of the
float of BITO. In comparison, a 1,000,000-contract position limit in
IBIT options would represent 7.474% \48\ of the float of IBIT.
Consequently, a 1,000,000 IBIT options position limit is generally
aligned with the standards applied to GLD, SLV and BITO, and,
therefore, appropriate.
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\48\ This percentage is arrived at with this equation:
(1,000,000 contract limit * 100 share per option/1,337,920,000
shares outstanding). This information was captured on February 11,
2026.
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ISE noted that IBIT began trading in penny increments on January 2,
2025 pursuant to the Penny Interval Program.\49\ The Commission noted
that evidence and analysis provided in connection with the Penny Pilot
demonstrated that the Pilot benefitted investors and other market
participants in the form of narrower spreads.\50\ The most actively
traded options classes are included in the Penny Program based on
certain objective criteria (trading volume thresholds and initial price
tests).\51\ 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.\52\ 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 pursuant to the Penny Interval
Program. Failing to permit IBIT options to potentially increase
position and exercise limits given the trading in finer increments, may
artificially inhibit liquidity and create price inefficiency for IBIT
options.
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\49\ See 6.72A-O.
\50\ Penny Approval Order supra Note 36.
\51\ Options on iShares MSCI Emerging Markets, iShares China
Large-Cap ETF and iShares MSCI EAFE ETF also trade in penny
increments based on their liquidity.
\52\ Penny Approval Order, supra Note 36.
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Finally, as discussed above, the Exchange's surveillance and
reporting safeguards continue to be designed to deter and detect
possible manipulative behavior that might arise from increasing or
eliminating position and exercise limits in certain classes. The
Exchange believes that the current financial requirements imposed by
the Exchange and by the Commission adequately address concerns
regarding potentially large, unhedged positions in the options on the
underlying securities, further promoting just and equitable principles
of trading, the maintenance of a fair and orderly market, and the
protection of investors.
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 not necessary or appropriate in
furtherance of the purposes of the Act. In this regard and as indicated
above, the Exchange notes that the rule change is substantially similar
in all material respects to proposals submitted by ISE, PHLX and
BOX.\53\
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\53\ ISE Approval Order, PHLX Notice and BOX Notice, supra Note
5.
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The Exchange does not believe that the proposed rule change will
impose any burden on inter-market competition as the proposal is not
competitive in nature. The Exchange expects that all option exchanges
have or will adopt substantively similar proposals, such that the
Exchange's proposal would benefit competition. For these reasons, the
Exchange does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act. The Exchange's proposal does not burden intra-
market competition because all OTP Holders and OTP Firms would be
subject to the position limits in Rule 6.8-O and corresponding exercise
limits in Rule 6.9-O. 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.
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
Because the foregoing 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \54\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\55\
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\54\ 15 U.S.C. 78s(b)(3)(A)(iii).
\55\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \56\ permits the Commission
to 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 notes that the proposal will conform the Exchange's IBIT
options position and exercise limits with IBIT options position and
exercise limits on ISE, PHLX, and BOX Exchange LLC.\57\ Therefore, the
proposal raises no novel legal or regulatory issues. Thus, 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 operative upon filing.\58\
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\56\ 17 CFR 240.19b-4(f)(6)(iii).
\57\ See supra note 5 and accompanying text.
\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 the 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.
[[Page 45299]]
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
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-NYSEARCA-2026-76 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-NYSEARCA-2026-76. 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-NYSEARCA-2026-76 and should be submitted
on or before August 10, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\59\
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\59\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-14527 Filed 7-17-26; 8:45 am]
BILLING CODE 8011-01-P