Notice2026-08367
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Approving a Proposed Rule Change, as Modified by Amendment No. 5, To Amend the Position and Exercise Limits for IBIT Options
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Published
April 30, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 83 (Thursday, April 30, 2026)</title>
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[Federal Register Volume 91, Number 83 (Thursday, April 30, 2026)]
[Notices]
[Pages 23333-23335]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-08367]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105317; File No. SR-ISE-2025-26]
Self-Regulatory Organizations; Nasdaq ISE, LLC; Order Approving a
Proposed Rule Change, as Modified by Amendment No. 5, To Amend the
Position and Exercise Limits for IBIT Options
April 27, 2026.
I. Introduction
On November 13, 2025, Nasdaq ISE, LLC (``Exchange'' or ``ISE'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
increase the position and exercise limits for options on the iShares
Bitcoin Trust ETF (``IBIT'') and to amend its rules regarding the
position and exercise limits for Flexible Exchange (``FLEX'') IBIT
options. The proposed rule change was published for comment in the
Federal Register on November 26, 2025.\3\ On November 24, 2025, the
Exchange filed Amendment No. 1 to the proposed rule change. On January
5, 2026, pursuant to Section 19(b)(2) of the Act,\4\ the Commission
designated a longer period within which to approve the proposed rule
change, disapprove the proposed rule change, or institute proceedings
to determine whether to disapprove the proposed rule change.\5\ On
January 26, 2026, the Exchange filed Amendment No. 2 to the proposed
rule change. On January 27, 2026, the Exchange filed Amendment No. 3 to
the proposed rule change, withdrew Amendment Nos. 2 and 3, and filed
Amendment No. 4 to the proposed rule change. On February 20, 2026, the
Exchange filed Amendment No. 5 to the proposed rule change, which
supersedes and replaces the original proposal, as modified by Amendment
Nos. 1 and 4, in its entirety.\6\ On February 24, 2026, the Commission
issued notice of filing of Amendment No. 5 and instituted proceedings
under Section 19(b)(2)(B) of the Act \7\ to determine whether to
approve or disapprove the proposed rule change, as modified by
Amendment No. 5.\8\ The Commission received no comments regarding the
proposal. This order approves the proposed rule change, as modified by
Amendment No. 5.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 104235 (Nov. 21,
2025), 90 FR 54414.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 104542, 90 FR 750
(Jan. 8, 2026). The Commission designated February 24, 2026, as the
date by which the Commission shall either approve, disapprove, or
institute proceedings to determine whether to disapprove the
proposed rule change.
\6\ Amendment No. 5 revises the proposal to provide updated
information regarding IBIT's trading volume, market capitalization,
and other metrics discussed in the proposal; eliminate the proposed
changes related to the position and exercise limits for FLEX IBIT
options; remove statements indicating that the proposed position and
exercise limits would be reviewed on a six-month basis pursuant to
Options 9, Section 13(d); and eliminate references to reports
provided in connection with the Penny Program.
\7\ 15 U.S.C. 78s(b)(2)(B).
\8\ See Securities Exchange Act Release No. 104884 (Feb. 24,
2026), 91 FR 9904 (Feb. 27, 2028) (``Order Instituting
Proceedings'').
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II. Description of the Proposed Rule Change, as Modified by Amendment
No. 5
Under Exchange Options 9, Sections 13 and 15, IBIT options
currently are subject to position and exercise limits of 250,000
contracts on the same side of the market.\9\ As described more fully in
the Order Instituting Proceedings,\10\ the Exchange proposes to amend
its rules to increase the position and exercise limits for IBIT options
to 1,000,000 contracts on the same side of the market.\11\ The Exchange
states that the current position and exercise limits will impede the
activities of investors using IBIT options in hedging or income-
generating strategies.\12\ The Exchange further states that the
liquidity and market capitalization of IBIT reduce concerns regarding
the potential for market manipulation or disruption of the underlying
markets in connection with the proposed position and exercise
limits.\13\ In addition, the Exchange states that the proposed position
limits and exercise limits for IBIT options are consistent with
existing position and exercise limits for options on the iShares MSCI
Emerging Markets ETF (``EEM''), the iShares China Large-Cap ETF
(``FXI''), and the iShares MSCI EAFE ETF (``EFA'').\14\
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\9\ See Order Instituting Proceedings, 91 FR at 9905, footnote
10.
\10\ See supra note 8.
\11\ See proposed Exchange Options 9, Section 13, Supplementary
Material .01, and Options 9, Section 15, Supplementary Material .01.
\12\ See Order Instituting Proceedings, 91 FR at 9905.
\13\ See id. at 9906.
\14\ See id. at 9905. See also Exchange Options 9, Section 13,
Supplementary Material .01, and Exchange Options 9, Section 15,
Supplementary Material .01.
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The Exchange states that, as of February 11, 2026, the market
capitalization of IBIT was $52,661,063,818 and its average daily volume
(``ADV'') for the preceding six months was 61,803,035 shares.\15\ The
Exchange states that, in comparison, EEM had ADV of 29,459,889 shares
and assets under management (``AUM'') of $27,761,941,292; FXI had ADV
of 31,656,532 shares and AUM of $6,594,337,253; and EFA had ADV of
17,215,037 shares and AUM of $76,788,457,200.\16\
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\15\ See Order Instituting Proceedings, 91 FR at 9906.
\16\ See id.
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In addition, the Exchange reviewed IBIT's data relative to the
market capitalization of the entire bitcoin market.\17\ The Exchange
states that, as of February 11, 2026, the market capitalization of
bitcoin was greater than $1.374 trillion and that a position limit of
1,000,000 contracts would represent 7.474% of the outstanding shares of
IBIT.\18\ In addition, the Exchange states that because IBIT has a
creation and redemption process managed through the issuer, the
position limit can be compared to the total market capitalization of
the bitcoin market. The Exchange states that the exercisable risk for
options on IBIT would represent 0.278% of all bitcoin outstanding.\19\
The Exchange further states that, given the proposed 1,000,000-contract
position and exercise limits, if all options on IBIT shares were
exercised, it would have a virtually unnoticed impact on the entire
bitcoin market.\20\ The Exchange states that this analysis demonstrates
that the proposed 1,000,000-contract per same side position and
exercise limit is appropriate for options on IBIT given its
liquidity.\21\
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\17\ See id. at 9909.
\18\ See id. The Exchange states that options on the SPDR Gold
Shares (``GLD''), the iShares Silver Trust (``SLV''), and the
ProShares Bitcoin ETF (``BITO'') each have position and exercise
limits of 250,000 contracts on the same side of the market, and that
these limits represent 6.63% of the float of GLD, 4.53% of the float
of SLV, and 12.44% of the float of BITO. See id. at 9910.
\19\ See id. at 9909-10.
\20\ See id. at 9910.
\21\ See id.
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The Exchange states that IBIT options have more than sufficient
liquidity to garner an increased position and exercise limit of
1,000,000 contracts and that any concerns related to manipulation and
protection of investors are mollified by the significant liquidity
provision in IBIT.\22\ The Exchange states that the reporting
requirements for IBIT options will remain unchanged and will continue
to serve as an important part of the
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Exchange's surveillance efforts.\23\ In addition, the Exchange states
that its existing surveillance procedures and reporting requirements
are capable of properly identifying disruptive and/or manipulative
trading activity.\24\
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\22\ See id. at 9910-11.
\23\ See id. at 9911. See also Options 9, Section 16.
\24\ See Order Instituting Proceedings, 91 FR at 9911.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 5, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\25\ In particular, the
Commission finds that the proposed rule change, as modified by
Amendment No. 5, is consistent with Section 6(b)(5) of the Act,\26\
which requires, among other things, that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices and
to protect investors and the public interest.
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\25\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\26\ 15 U.S.C. 78f(b)(5).
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Position and exercise limits serve as a regulatory tool designed to
deter manipulative schemes and adverse market impact surrounding the
use of options. Since the inception of standardized options trading,
the options exchanges have had rules limiting the aggregate number of
options contracts that a member or customer may hold or exercise.
Options 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 to benefit
the options position.\27\ In addition, such limits serve to reduce the
possibility of disruption in the options market itself, especially in
illiquid classes.\28\ As the Commission has previously recognized,
markets with active and deep trading interest, as well as with broad
public ownership, are more difficult to manipulate or disrupt than less
active and deep markets with smaller public floats.\29\ The Commission
also has recognized 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.\30\ At the same time, the
Commission has recognized that limits must not be established at levels
that are so low as to discourage participation in the options market by
institutions and other investors with substantial hedging needs or to
prevent specialists and market-makers from adequately meeting their
obligations to maintain a fair and orderly market.\31\
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\27\ See Securities Exchange Act Release No. 39489 (Dec. 24,
1997), 63 FR 276, 279 (Jan. 5, 1998) (order approving File No. SR-
Cboe-97-11).
\28\ See id.
\29\ See id.
\30\ See, e.g., Securities Exchange Act Release Nos. 21907 (Mar.
29, 1985), 50 FR 13440, 13441 (Apr. 4, 1985) (order approving File
Nos. SR-CBOE-84-21, SR-Amex-84-30, SR-Phlx-84-25, and SR-PSE-85-1);
and 40875 (Dec. 31, 1998), 64 FR 1842, 1843 (Jan. 12, 1999) (order
approving File Nos. SR-CBOE-98-25; Amex-98-22; PCX-98-33; and Phlx-
98-36).
\31\ See id.
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Currently, the position and exercise limits in ISE Options 9,
Sections 13 and 15, respectively, apply to IBIT options, and, under
these rules, IBIT options have position and exercise limits of 250,000
contracts on the same side of the market.\32\ ISE proposes to amend its
rules to increase the position and exercise limits for IBIT options to
1,000,000 contracts on the same side of the market.\33\
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\32\ See Order Instituting Proceedings, 91 FR at 9905, footnote
10.
\33\ See proposed ISE Options 9, Section 13, Supplementary
Material .01, and ISE Options 9, Section 15, Supplementary Material
.01.
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The Exchange provided data and analysis supporting the proposed
position and exercise limits. The Exchange states that, as of February
11, 2026, IBIT had 1,337,920,000 shares outstanding and market
capitalization of $52,661,063,818.\34\ The Exchange states that a
position limit of 1,000,000 contracts would represent 7.474% of the
outstanding shares of IBIT.\35\ The Exchange further states that any
concerns that the proposed limits might raise with respect to market
manipulation and investor protection ``are mollified by the significant
liquidity provision in IBIT.'' \36\
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\34\ See Order Instituting Proceedings, 91 FR at 9906.
\35\ See id. at 9909.
\36\ Id. at 9911.
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The Exchange also compared the size of the proposed position and
exercise limits to the market capitalization of the bitcoin market,
which, according to the Exchange, was greater than $1.374 trillion as
of February 11, 2026.\37\ The Exchange calculates that with a position
limit of 1,000,000 contracts (which represents 100,000,000 shares of
IBIT), the exercisable risk for options on IBIT would represent 0.278%
of all bitcoin outstanding.\38\ The Exchange states that, assuming a
scenario where all options on IBIT shares were exercised given a
1,000,000-contract position and exercise limit, it ``would have a
virtually unnoticed impact on the entire Bitcoin market,'' and,
further, that the Exchange's analysis ``demonstrates that the proposed
1,000,000 per same side position and exercise limit is appropriate for
options on IBIT given its liquidity.'' \39\
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\37\ See id. at 9909.
\38\ See id. at 9909-10.
\39\ Id. at 9910.
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The Commission finds that the proposed position and exercise limits
are consistent with the Act, and in particular, with the requirements
in Section 6(b)(5) that the rules of a national securities exchange be
designed to prevent fraudulent and manipulative acts and practices and
to protect investors and the public interest. As discussed above, the
Commission has recognized 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 option
contracts disproportionate to the deliverable supply and average
trading volume of the underlying security.\40\ In addition, the
Commission has stated previously that 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
disrupt the underlying market so as to benefit the options
position.\41\ Based on its review of the data and analysis provided by
the Exchange, the Commission concludes that the proposed position and
exercise limits satisfy these objectives. Specifically, the Commission
has considered and reviewed the Exchange's analysis that, based on data
from February 11, 2026, a position limit of 1,000,000 contracts would
represent 7.474% of the outstanding shares of IBIT.\42\ The Commission
also has considered and reviewed the Exchange's statements that, as of
February 11, 2026, IBIT had 1,337,920,000 shares outstanding, market
capitalization of $52,661,063,818, and ADV of 61,803,035 shares for the
preceding six months.\43\
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\40\ See supra note 30 and accompanying text.
\41\ See supra note 27 and accompanying text.
\42\ See Order Instituting Proceedings, 91 FR at 9910.
\43\ See id. at 9906. In addition, the Commission has considered
and reviewed the Exchange's statements that the position and
exercise limits for options on GLD, SLV, and BITO would represent
6.63%, 4.53%, and 12.44%, respectively, of the outstanding shares of
those exchange-traded products. See id. at 9910. Further, the
Commission has considered and reviewed the Exchange's statements
regarding the ADV and assets under management of EEM, FXI, and EFA,
each of which underlies options that have position and exercise
limits of 1,000,000 contracts. See ISE Options 9, Section 13,
Supplementary Material .01.
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Based on the Commission's review of this information and analysis,
the Commission concludes that the proposed position and exercise limits
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.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\44\ that the proposed rule change (SR-ISE-2025-26), as modified by
Amendment No. 5 be, and hereby is, approved.
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\44\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
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\45\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-08367 Filed 4-29-26; 8:45 am]
BILLING CODE 8011-01-P
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