Notice2025-16180
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Change To Amend BOX Rule 3120 To Increase the Position and Exercise Limits for the Grayscale Bitcoin Mini Trust ETF, the Bitwise Bitcoin ETF, and the Grayscale Bitcoin Trust ETF
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 25, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 162 (Monday, August 25, 2025)</title>
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[Federal Register Volume 90, Number 162 (Monday, August 25, 2025)]
[Notices]
[Pages 41420-41425]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-16180]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103748; File No. SR-BOX-2025-23]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of Proposed Change To Amend BOX Rule 3120
To Increase the Position and Exercise Limits for the Grayscale Bitcoin
Mini Trust ETF, the Bitwise Bitcoin ETF, and the Grayscale Bitcoin
Trust ETF
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, BOX Exchange LLC (``BOX'' 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 BOX Rule 3120 (Position Limits) to
increase the position and exercise limits for the Grayscale Bitcoin
Mini Trust ETF (``BTC''), the Bitwise Bitcoin ETF (``BITB'') and the
Grayscale Bitcoin Trust ETF (``GBTC''). The text of the proposed rule
change is available from the principal office of the Exchange, at the
Commission's Public Reference Room and also on the Exchange's internet
website at <a href="https://rules.boxexchange.com/rulefilings">https://rules.boxexchange.com/rulefilings</a>.
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 these 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 3120, Position Limits,\4\ to
permit BTC, BITB, and GBTC to increase their position and exercise
limits for options on BTC, BITB, and GBTC from 25,000 contracts by
removing BTC, BITB, and GBTC from IM-3120-2. This is a competitive
filing based on similar proposals submitted by NYSE Arca, Inc.
(``Arca'') and approved by the Securities and Exchange Commission
(``Commission'').\5\
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\4\ The Exchange notes that Rule 3140(c) Exercise Limits
provides that limits shall be determined in the manner described in
Rule 3120 (Position Limits). Additionally, IM-3140-1 provides the
exercise limits established under Rule 3140, in respect to options
on shares or other securities that represent interests in registered
investment companies (or series thereof) organized as open-end
management investment companies, unit investment trusts or similar
entities that satisfy the criteria set forth in Rule 5020 shall be
equivalent to the position limits prescribed for such options in IM-
3120-2, subject to any exemptions granted in respect to such
position limits.
\5\ See Securities Exchange Act Release Nos. 103568 (July 29,
2025), 90 FR 36238 (August 1, 2025), (SR-NYSEArca-2025-10) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 2, To
Amend Rules Regarding Position and Exercise Limits for Options on
the Grayscale Bitcoin Mini Trust (''BTC'') and the Bitwise Bitcoin
ETF (``BITB'') and To Permit Flexible Exchange Options on BTC and
BITB) and 103567 (July 29, 2025), 90 FR 36253 (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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BTC and BITB
On October 18, 2024, the Commission approved the listing and
trading of BTC and BITB on NYSE American LLC (``NYSE American'').\6\ On
November 22, 2024, Arca obtained rule authority to trade options on BTC
and BITB.\7\ The current position and exercise limits for BTC and BITB
options are 25,000 contracts on BOX, the lowest limit available in
options.\8\ Arca proposed to effectively increase the aggregated
position and exercise limits for each ETF to 250,000 contracts.\9\ Arca
noted that BTC and BITB currently qualify for this increased limit
pursuant to Arca Rule 6.8-O Commentary .06(e), which requires that, for
the most recent six-month period, trading volume for the underlying
security is at least 100,000,000 shares.\10\ Arca noted that, as of
November 25, 2024, during the most recent six-month period, trading
volume for BTC was 163,712,700 shares. Arca noted that during the same
period, trading volume for BITB was 288,800,860 shares. In addition,
Arca noted that, as of November 25, 2024, the market capitalization for
BTC was $3,496,748,882 \11\ with an average daily volume (``ADV'') for
the preceding three months of 2,036,369 shares, and the market
capitalization of BITB was 4,095,157,000 \12\ with an ADV for the three
prior months of 2,480,478. BTC and BITB are well above the requisite
minimum of 100,000,000 shares necessary to qualify for the 250,000
contract position and exercise limit. Also, Arca noted that, as of
November 25, 2024, there were 19,787,762 bitcoins in circulation.\13\
At a price of $94,830 per bitcoin,\14\ that equates to a market
capitalization of greater than $1.876 trillion. Arca noted that if a
position limit of 250,000 contracts were considered for each ETF, the
exercisable risk would represent 30.14% \15\ of BTC
[[Page 41421]]
shares outstanding; and 31.27%\16\ of BITB shares outstanding. Given
the liquidity of BTC and BITB, the current 25,000 position limit
appears extremely conservative.
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\6\ See Securities Exchange Act Release No. 101386 (October 18,
2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (order
approving rules to permit the listing and trading of options on BTC
and BITB, among others) (the ``ETF Options Approval Order'').
\7\ See Securities Exchange Act Release No. 101713 (November 22,
2024), 89 FR 94839 (November 29, 2024) (SR-NYSEARCA-2024-101)
(notice of immediately effective rule change to permit BTC and BITB
options trading, based on the already-approved NYSE American rules)
(the ``Arca ETF Options Notice'').
\8\ See BOX IM-3120-2.
\9\ See Securities Exchange Act Release No. 103568 (July 29,
2025), 90 FR 36238 (August 1, 2025), (SR-NYSEArca-2025-10) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 2, To
Amend Rules Regarding Position and Exercise Limits for Options on
the Grayscale Bitcoin Mini Trust (''BTC'') and the Bitwise Bitcoin
ETF (``BITB'') and To Permit Flexible Exchange Options on BTC and
BITB).
\10\ See Arca Rule 6.8-O Commentary .06(e) (providing at
subparagraph (e) that the position limit shall be 250,000 contracts
for options: (i) on underlying stock or Exchange-Traded Fund Share
that had trading volume of at least 100,000,000 shares during the
most recent six-month trading period; or (ii) on an underlying stock
or Exchange-Traded Fund Share that had trading volume of at least
75,000,000 shares during the most recent six-month trading period
and has at least 300,000,000 shares currently outstanding).
\11\ The market capitalization of BTC was determined by
multiplying a settlement price ($42.16) by the number of shares
outstanding (82,939,964). Data represents figures from FactSet as of
November 25, 2024.
\12\ The market capitalization of BITB was determined by
multiplying a settlement price ($51.70) by the number of shares
outstanding (79,950,100). Data represents figures from FactSet as of
November 25, 2024.
\13\ See <a href="https://www.coingecko.com/en/coins/bitcoin">https://www.coingecko.com/en/coins/bitcoin</a>.
\14\ This is the approximate price of bitcoin from 4:00 p.m. ET
on November 25, 2024.
\15\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/82,939,964 BTC shares
outstanding).
\16\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/79,950,100 BITB shares
outstanding).
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First, Arca reviewed the ETFs' data relative to the market
capitalization of the entire bitcoin market in terms of exercise risk
and availability of deliverables. Arca noted that, as noted above, as
of November 25, 2024, there were 19,787,762 bitcoins in
circulation.\17\ At a price of $94,830 per bitcoin,\18\ that equates to
a market capitalization of greater than $1.876 trillion. Arca noted
that if the proposed aggregated position limit of 250,000 contracts
were considered, the exercisable risk would represent 30.14% of BTC
shares outstanding \19\ and 31.27% of BITB shares outstanding.\20\ Arca
noted that since each ETF has a creation and redemption process managed
through the issuer (whereby bitcoin is used to create BTC or BITB
shares, as applicable), 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 each ETF would represent less than
0.06% (BTC) or 0.07% (BITB) of all bitcoin outstanding.\21\
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\17\ See <a href="https://www.coingecko.com/en/coins/bitcoin">https://www.coingecko.com/en/coins/bitcoin</a>.
\18\ This is the approximate price of bitcoin from 4:00 p.m. ET
on November 25, 2024.
\19\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/82,939,964 BTC shares
outstanding).
\20\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/79,950,100 BITB shares
outstanding).
\21\ For BTC, this number was arrived at with this calculation:
((250,000 limit * 100 shares per option * $42.16 settle)/(19,787,762
bitcoin outstanding * $94,830 bitcoin price)); and for BITB, this
number was arrived at with this calculation: ((250,000 limit * 100
shares per option * $51.70 settle)/(19,787,762 bitcoin outstanding *
$94,830 bitcoin price)).
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Next, Arca reviewed the proposed position limit by comparing it to
position limits for derivative products regulated by the CFTC. While
the CFTC, through the relevant Designated Contract Markets, only
regulates options positions based upon delta equivalents (creating a
less stringent standard), Arca examined equivalent bitcoin futures
position limits. In particular, Arca looked to the CME bitcoin futures
contract \22\ that has a position limit of 2,000 futures. Arca noted
that, on October 22, 2024, CME bitcoin futures settled at $94,945.\23\
Arca noted that, on October 22, 2024, BTC settled at $29.90, and BITB
settled at $36.74, which would equate to approximately 31,754,181 and
25,842,406 shares of BTC and BITB, respectively, 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 317,541
(BTC) and 258,424 (BITB).
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\22\ CME Bitcoin Futures are described in Chapter 350 of CME's
Rulebook.
\23\ 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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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).\24\ 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.\25\ 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. Considering CME's position limits on bitcoin futures, the
Exchange believes a 250,000-contract limit for options on each ETF
would be appropriate.
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\24\ See <a href="https://www.cmegroup.com/education/courses/market-regulation/position-limits/positionlimits-aggregation-of-contracts-and-table.htm">https://www.cmegroup.com/education/courses/market-regulation/position-limits/positionlimits-aggregation-of-contracts-and-table.htm</a>.
\25\ See id.
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Finally, Arca analyzed a position and exercise limit of 250,000 for
BTC and BITB against other options on commodity ETFs, namely SPDR Gold
Shares (``GLD'') and iShares Silver Trust (``SLV'').\26\ GLD has a
float of 306.1 million shares and a position limit of 250,000
contracts.\27\ 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. In comparison, a 250,000-
contract position limit in each of BTC and BITB, would represent 30.14%
of the BTC float and 31.27% of the BITB float. While less conservative
than the standard applied to options on GLD, the Exchange nonetheless
believes that subjecting options on BTC and BITB to a 250,000 contract
position and exercise limit would be appropriate.\28\
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\26\ Like BTC and BITB, GLD and SLV each hold one asset in
trust.
\27\ See <a href="https://www.ssga.com/us/en/intermediary/etfs/spdr-gold-shares-gld">https://www.ssga.com/us/en/intermediary/etfs/spdr-gold-shares-gld</a>.
\28\ See, e.g., BOX Rule 3120(d)(5) (setting forth trading
volume requirements to qualify for a 250,000 contract position (and
exercise) limit).
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Based on the foregoing, the Exchange believes that BTC and BITB
each have more than sufficient liquidity to garner an increased
position and exercise limit of 250,000 same-side contracts pursuant to
BOX Rules 3120 and 3140. The Exchange believes that the significant
liquidity present in each ETF mitigates against the potential for
manipulation.
The Exchange believes that allowing options on each ETF to have
increased aggregated 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 Participant that maintains positions in
options on BTC or BITB, 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 \29\ would continue to be
exempt from this reporting requirement, however, the Exchange may
access Market Maker position information.\30\ Moreover, the Exchange's
requirement that Participants file reports with the
[[Page 41422]]
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.\31\
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\29\ The term ``Market Maker'' means an Options Participant
registered with the Exchange for the purpose of making markets in
options contracts traded on the Exchange and that is vested with the
rights and responsibilities specified in the Rule 8000 Series. All
Market Makers are designated as specialists on the Exchange for all
purposes under the Exchange Act or Rules thereunder. See BOX Rule
100(31).
\30\ 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 FINRA, acting as its agent pursuant to a
regulatory services agreement (``RSA'').
\31\ See BOX Rule 3150.
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GBTC
On October 18, 2024, the Commission approved the listing and
trading of GBTC options on NYSE American.\32\ On November 22, 2024,
Arca received rule authority to trade GBTC options with a 25,000
contract position limit, the lowest limit available in options.\33\
Arca noted that GBTC currently qualifies for a 250,000-limit on same-
side contracts pursuant to Arca Rule 6.8-O Commentary .06(e)(i), which
requires that trading volume for the underlying security in the most
recent six months be at least 100,000,000 shares.\34\ Arca noted that,
as of November 25, 2024, during the most recent six-month period,
trading volume for GBTC was 550,687,400 shares. In addition, Arca noted
that, as of November 25, 2024, the market capitalization for GBTC was
$20,661,316,542,\35\ with an average daily volume (``ADV'') for the
preceding three months of 3,829,597 shares. GBTC is well above the
requisite minimum of 100,000,000 shares necessary to qualify for the
250,000-contract position and exercise limit. Also, Arca noted that, as
of November 25, 2024, there were 19,787,762 bitcoins in
circulation.\36\ At a price of $94,830 per bitcoin,\37\ that equates to
a market capitalization of greater than $1.876 trillion. If an
aggregated position and exercise limit of 250,000 contracts were
considered, the exercisable risk would represent 9.13%\38\ of GBTC
shares outstanding. Given GBTC's liquidity, the current 25,000-contract
position (and exercise) limit is extremely conservative.
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\32\ See Securities Exchange Act Release No. 101386 (October 18,
2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (order
approving rules to permit the listing and trading of GBTC options,
among others) (the ``GBTC Options Approval Order'').
\33\ See Securities Exchange Act Release No. 101713 (November
22, 2024), 89 FR 94839 (November 29, 2024) (SR-NYSEARCA-2024-101)
(notice of immediately effective rule change to permit GBTC options
trading, based on the already-approved NYSE American rules) (the
``Arca GBTC Options Notice'').
\34\ See Arca Rule 6.8-OCommentary .06(e) (providing at
subparagraph (e) that the position limit shall be 250,000 contracts
for options: (i) on underlying stock or Exchange-Traded Fund Share
that had trading volume of at least 100,000,000 shares during the
most recent six-month trading period; or (ii) on an underlying stock
or Exchange-Traded Fund Share that had trading volume of at least
75,000,000 shares during the most recent six-month trading period
and has at least 300,000,000 shares currently outstanding). 1 See
Securities Exchange Act Release No. 103567 (July 29, 2025), 90 FR
36253 (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.
\35\ The market capitalization of GBTC was determined by
multiplying a settlement price ($75.42) by the number of shares
outstanding (273,950,100). Data represents figures from FactSet as
of November 25, 2024.
\36\ See <a href="https://www.coingecko.com/en/coins/bitcoin">https://www.coingecko.com/en/coins/bitcoin</a>.
\37\ This is the approximate price of bitcoin from 4:00 p.m. ET
on November 25, 2024.
\38\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/273,950.100 shares
outstanding).
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First, Arca reviewed GBTC'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.\39\ At a price of
$94,830 per bitcoin,\40\ Arca noted that equates to a market
capitalization of greater than $1.876 trillion. If an aggregated
position (and exercise) limit of 250,000 contracts were considered, the
exercisable risk would represent 9.13% \41\ of the outstanding shares
of GBTC. Since GBTC has a creation and redemption process managed
through the issuer (whereby bitcoin is used to create GBTC shares), 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 GBTC would represent less than 0.10% of all bitcoin
outstanding.\42\ The Exchange notes that if GBTC options were subject
to a 250,000-contract position and exercise limit (based on GBTC
trading volume) and if all options on GBTC shares were exercised at
once, this occurrence would have a virtually unnoticed impact on the
entire bitcoin market. This analysis demonstrates that a 250,000-
contract position (and exercise) limit for GBTC options would be
appropriate given GBTC's liquidity.
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\39\ See <a href="https://www.coingecko.com/en/coins/bitcoin">https://www.coingecko.com/en/coins/bitcoin</a>.
\40\ This is the approximate price of bitcoin from 4:00 p.m. ET
on November 25, 2024.
\41\ This percentage is arrived at with this equation: (250,000
contract limit * 100 shares per option/273,950,100 shares
outstanding).
\42\ This number was arrived at with this calculation: ((250,000
limit * 100 shares per option * $75.42 settle)/(19,787,762 BTC
outstanding * $94,830 BTC price)).
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Next, Arca reviewed the proposed position limit by comparing it to
position limits for derivative products regulated by the CFTC. While
the CFTC, through the relevant Designated Contract Markets, only
regulates options positions based upon delta equivalents (creating a
less stringent standard), Arca examined equivalent bitcoin futures
position limits. In particular, Arca looked to the CME bitcoin futures
contract,\43\ which has a position limit of 2,000 futures (for the
initial spot month).\44\ Arca noted that, on October 22, 2024, CME
bitcoin futures settled at $94,945.\45\ Arca noted that on October 22,
2024, GBTC settled at $53.64, which would equate to greater than
17,700,410 shares of GBTC 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.
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\43\ CME Bitcoin Futures are described in Chapter 350 of CME's
Rulebook.
\44\ 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.
\45\ 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.
---------------------------------------------------------------------------
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).\46\ 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.\47\ 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. Considering CME's position limits on bitcoin futures, the
Exchange believes a 250,000-contract limit for GBTC options would be
appropriate.
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\46\ See <a href="https://www.cmegroup.com/education/courses/market-regulation/position-limits/positionlimits-aggregation-of-contracts-and-table.htm">https://www.cmegroup.com/education/courses/market-regulation/position-limits/positionlimits-aggregation-of-contracts-and-table.htm</a>.
\47\ See id.
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[[Page 41423]]
Finally, Arca analyzed a position and exercise limit of 250,000 for
GBTC against options on SPDR Gold Shares (``GLD''), which (like GBTC),
is a commodity-backed ETF.\48\ Arca noted that GLD has a float of 306.1
million shares and a position limit of 250,000 contracts.\49\ 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. Arca noted that a position limit
exercise in GLD would represent 8.17% of the float of GLD. In
comparison, Arca noted that a 250,000 contract position limit in GBTC
would represent 9.13% of the float of GBTC. While less conservative
than the standard applied to options on GLD, Arca nonetheless believes
that subjecting GBTC options to a 250,000 contract position and
exercise limit would be appropriate.\50\
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\48\ GLD, like GBTC, holds one asset in trust.
\49\ See <a href="https://www.ssga.com/us/en/intermediary/etfs/spdr-gold-shares-gld">https://www.ssga.com/us/en/intermediary/etfs/spdr-gold-shares-gld</a>.
\50\ See, e.g., Arca Rule 6.8-O, Commentary .06(e) (setting
forth trading volume requirements to qualify for a 250,000-contract
position (and exercise) limit).
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Based on the foregoing, the Exchange believes that GBTC has more
than sufficient liquidity to garner an increased position and exercise
limit of 250,000 same-side contracts. The Exchange believes that the
significant liquidity present in GBTC mitigates against the potential
for manipulation.
The Exchange believes that allowing GBTC options to have increased
aggregated 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 Participant that maintains positions in GBTC 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 \51\ would continue to be exempt from
this reporting requirement, however, the Exchange may access Market
Maker position information.\52\ Moreover, the Exchange's requirement
that Participants 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.\53\
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\51\ The term ``Market Maker'' means an Options Participant
registered with the Exchange for the purpose of making markets in
options contracts traded on the Exchange and that is vested with the
rights and responsibilities specified in the Rule 8000 Series. All
Market Makers are designated as specialists on the Exchange for all
purposes under the Exchange Act or Rules thereunder. See BOX Rule
100(31).
\52\ OCC through the 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 FINRA, acting as
its agent pursuant to a RSA.
\53\ See BOX Rule 3150.
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The Exchange also has no reason to believe that the growth in
trading volume in BTC, BITB, and GBTC options will not continue.
Rather, the Exchange expects continued options volume growth in BTC,
BITB, and GBTC as opportunities for investors to participate in the
options markets increase and evolve. The Exchange believes that the
current position and exercise limits in BTC, BITB, and GBTC 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 BTC,
BITB, and GBTC options, market participants will find the 25,000-
contract position 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 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 to identify unusual activity in both
options and the underlying equities.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\54\ in general, and Section 6(b)(5) of the Act,\55\ in
particular, 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. Additionally, the Exchange believes the proposed rule
change is consistent with the Section (6)(b)(5) \56\ requirement that
the rules of an exchange not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\54\ 15 U.S.C. 78f(b).
\55\ 15 U.S.C. 78f(b)(5).
\56\ Id.
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BTC and BITB
The Exchange believes the proposed rule change to remove the
25,000-contract position (and exercise) limit on BTC and BITB options
thus allowing such options to qualify for higher aggregated limits 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 as it will provide market participants with the
ability to more effectively execute their trading and hedging
activities. In addition, this proposed change may allow Market Makers
to maintain their liquidity in these options in amounts commensurate
with the continued demand for BTC and BITB options. Further, an
increased aggregated position (and exercise) limit on BTC and BITB
options may 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 that permitting a
higher aggregated position (and exercise) limit on BTC and BITB options
would further allow institutional investors to utilize such options for
prudent risk management purposes.
As noted herein, Arca analyzed several data points that support the
appropriateness of an aggregated
[[Page 41424]]
position (and exercise) limit of 250,000 contracts for BTC and BITB
options based on recent trading volume in each ETF. Specifically, Arca
noted that a comparison of each ETF's market capitalization to the
bitcoin market in terms of exercise risk and availability of
deliverables revealed that the exercisable risk of an aggregated limit
of 250,000 contracts represented 30.14% and 31.27% of BTC and BITB
shares outstanding. Further, since each ETF has a creation and
redemption process managed through the issuer (whereby bitcoin is used
to create BTC or BITB shares, as applicable), a 250,000-contract
position (and exercise) limit as compared to the market capitalization
of the bitcoin market indicated that the exercisable risk for options
on each ETF represented less than 0.06% (BTC) or 0.07% (BITB) of all
bitcoin outstanding as noted by Arca. Moreover, a comparison of a
250,000-contract position limit for options on each ETF to the (actual)
position limits for equivalent bitcoin futures revealed that a 250,000-
contract limit for each ETF would be appropriate. Finally, Arca
compared an aggregated position limit of 250,000 contracts for each ETF
against GLD, another commodity-backed ETF. A position limit exercise in
GLD represents 8.17% of the float of GLD. By comparison, Arca noted
that a position limit exercise in each ETF (assuming a 250,000-contract
limit would represent 30.14% (BTC) and 31.27% (BITB) of that ETF's
float. Although a 250,000-contract position (and exercise) limit on BTC
and BITB options would not be as conservative as the standard applied
to GLD, it is comparable and therefore appropriate.
GBTC
The Exchange believes the proposed rule change to remove the
25,000-contract position (and exercise) limit on GBTC options thus
allowing such options to qualify for higher aggregated limits 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 as it will provide market participants with the
ability to more effectively execute their trading and hedging
activities. In addition, this proposed change may allow Market Makers
to maintain their liquidity in these options in amounts commensurate
with the continued demand for GBTC options. Further, an increased
aggregated position (and exercise) limit on GBTC options may 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 that permitting a higher aggregated position
(and exercise) limit on GBTC options would further allow institutional
investors to utilize such options for prudent risk management purposes.
As noted herein, Arca analyzed several data points that support the
appropriateness of an aggregated position (and exercise) limit of
250,000 contracts for GBTC options based on recent trading volume in
GBTC. Specifically, Arca noted that a comparison of GBTC's market
capitalization to the bitcoin market in terms of exercise risk and
availability of deliverables revealed that the exercisable risk of an
aggregated limit of 250,000 contracts represented 9.13% of GBTC shares
outstanding. Further, since GBTC has a creation and redemption process
managed through the issuer (whereby bitcoin is used to create GBTC
shares), a 250,000-contract position (and exercise) limit as compared
to the market capitalization of the bitcoin market indicated that the
exercisable risk for GBTC options represented less than 0.10% of all
bitcoin outstanding as noted by Arca. Moreover, a comparison of a
250,000-contract position limit for GBTC options to the (actual)
position limits for equivalent bitcoin futures revealed that a 250,000-
contract limit would be appropriate. Finally, Arca compared an
aggregated position limit of 250,000 contracts for GBTC options against
GLD, another commodity backed ETF. Arca noted that a position limit
exercise in GLD represents 8.17% of the float of GLD. By comparison, a
position limit exercise in GBTC options (assuming a 250,000-contract
limit) would represent 9.13% of the GBTC float. Although a 250,000-
contract position (and exercise) limit on GBTC options would not be as
conservative as the standard applied to GLD, it is comparable and
therefore appropriate.
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. In this regard and as
indicated above, the Exchange notes that the rule change is being
proposed as a competitive response to filings submitted by Arca.\57\
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\57\ See supra note 4.
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The Exchange's proposal does not burden intra-market competition
because all Participants would be subject to the position limits in
Rule 3120 and corresponding exercise limits in Rule 3140. 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.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition as the proposal is not
competitive in nature. The Exchange expects that all option exchanges
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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on 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 \58\ and Rule 19b-4(f)(6) thereunder.\59\
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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\58\ 15 U.S.C. 78s(b)(3)(A)(iii).
\59\ 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 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 the pre-filing requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \60\ 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),\61\ the
Commission may
[[Page 41425]]
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 GBTC, BTC, and BITB, 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.\62\ The Exchange is proposing similarly
to remove of the 25,000 contract position and exercise limit for GBTC,
BTC, and BITB, such that those funds will be subject to the position
and exercise limits as determined by the position limit rules at Rule
3120. The Exchange has provided information regarding GBTC, BTC, and
BITB, including, among other things, information regarding trading
volume, and the market capitalization of GBTC, BTC, and BITB 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 GBTC, BTC, and BITB 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.\63\
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\60\ 17 CFR 240.19b-4(f)(6).
\61\ 17 CFR 240.19b-4(f)(6)(iii).
\62\ See ETF Options Approval Order.
\63\ 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) \64\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\64\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#ee9c9b828bc38d8183838b809a9dae9d8b8dc0898198"><span class="__cf_email__" data-cfemail="1f6d6a737a327c7072727a716b6c5f6c7a7c31787069">[email protected]</span></a>. Please include
file number SR-BOX-2025-23 on the subject line.
Paper Comments
<bullet> 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-BOX-2025-23. 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 (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). 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-BOX-2025-23 and should be submitted on
or before September 15, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\65\
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\65\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-16180 Filed 8-22-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on August 25, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.