Notice2026-10140
Self-Regulatory Organizations; Nasdaq PHLX LLC; 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
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
May 21, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 98 (Thursday, May 21, 2026)</title>
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[Federal Register Volume 91, Number 98 (Thursday, May 21, 2026)]
[Notices]
[Pages 30008-30016]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-10140]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105501; File No. SR-Phlx-2026-29]
Self-Regulatory Organizations; Nasdaq PHLX LLC; 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
May 18, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 5, 2026, Nasdaq PHLX LLC (``Phlx'' 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 Exchange. 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\ 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 Options 9, Section 13 to increase
the position and exercise limits \3\ for options on iShares Bitcoin
Trust ETF (``IBIT'').
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\3\ Phlx Options 9, Section 15, Exercise Limits, references the
position limits at Options 9, Section 13, therefore, the exercise
limits are not being separately amended.
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The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings">https://listingcenter.nasdaq.com/rulebook/phlx/rulefilings</a>,
and at the principal office of the Exchange.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Options 9, Section 13, Position
Limits, and Options 9, Section 15, Exercise Limits, for options on
IBIT. The Exchange also proposes a technical amendment to Options 6C,
Section 3, Proper and Adequate Margin. Each change is discussed below.
Position and Exercise Limits
Nasdaq ISE, LLC (``ISE'') recently received approval to increase
the position and exercise limits for options on IBIT to 1,000,000
contracts on the same side of the market.\4\ IBIT is an Exchange-Traded
Fund (``ETF'') that holds Bitcoin and is listed on The Nasdaq Stock
Market LLC.\5\ Options on IBIT are listed pursuant to Options 4,
Section 3(h)(vi).\6\ On September 20, 2024, ISE received approval to
list options on IBIT.\7\ The position and exercise limits for IBIT
options are currently set as stated in Options 9, Sections 13 and
15.\8\
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\4\ See Securities Exchange Act Release No. 105317 (April 27,
2026), 91 FR 750 (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).
\5\ Nasdaq received approval to list and trade Bitcoin-Based
Commodity-Based Trust Shares in IBIT pursuant to Rule 5711(d) of
Nasdaq. See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (SR-NASDAQ-2023-016) (Order
Granting Accelerated Approval of Proposed Rule Changes, as Modified
by Amendments Thereto, To List and Trade Bitcoin-Based Commodity-
Based Trust Shares and Trust Units). IBIT started trading on January
11, 2024.
\6\ The Exchange notes that Phlx Options 4 Rules incorporate by
reference ISE Options 4 Rules.
\7\ See Securities Exchange Act Release No. 101128 (September
20, 2024), 89 FR 78942 (September 26, 2024) (SR-ISE-2024-03) (Notice
of Filing of Amendment Nos. 4 and 5 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1,
4, and 5, To Permit the Listing and Trading of Options on the
iShares Bitcoin Trust) (``IBIT Approval Order''). ISE began trading
IBIT options on November 19, 2024.
\8\ IBIT currently has a position and exercise limit of 250,000
contracts on the Exchange.
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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, which are described
in Options 9, Sections 13 and 15, are intended to address potential
manipulative schemes and adverse market impacts surrounding the use of
options, such as disrupting the market in the security underlying the
options. Position and exercise limits must balance concerns regarding
mitigating potential manipulation and the cost of inhibiting potential
hedging activity that could be used for legitimate economic purposes.
To achieve this balance, the Exchange proposes to increase the
position limits and exercise limits for options on IBIT to 1,000,000
contracts by noting the proposed position limit in Options 9, Section
13(a), which then reflects the exercise limits in Options 9, Section
15. The position limit for options on IBIT is currently set pursuant to
Options 9, Section 13(g) where 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. The Exchange notes that the proposed position
limits and exercise limits for options on IBIT are consistent with
existing position limits and exercise limits for options on iShares
MSCI Emerging Markets, iShares China Large-Cap ETF and iShares MSCI
EAFE ETF.
Composition and Growth Analysis for Underlying ETFs
As stated above, position (and exercise) limits are intended to
prevent the establishment of options positions that can be used or
might create incentives to manipulate the underlying market so as to
benefit options positions. The Commission has recognized that these
limits are designed to minimize the potential for mini-manipulations
and for corners or squeezes of the underlying market, as well as serve
to reduce the possibility
[[Page 30009]]
for disruption of the options market itself, especially in illiquid
classes.\9\
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\9\ See Securities Exchange Act Release No. 67672 (August 15,
2012), 77 FR 50750 (August 22, 2012) (SR-NYSEAmex-2012-29).
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Per the Commission, ``rules regarding position and exercise limits
are intended to prevent the establishment of options positions that can
be used or might create incentives to manipulate or disrupt the
underlying market so as to benefit the options positions.'' \10\ For
this reason, the Commission requires that ``position and exercise
limits must be sufficient to prevent investors from disrupting the
market for the underlying security by acquiring and exercising a number
of options contracts disproportionate to the deliverable supply and
average trading volume of the underlying security.'' \11\ The Exchange
has observed an ongoing increase in demand in options on IBIT in
2025.\12\ The Exchange believes the current position limit and exercise
limit of 250,000 contracts (the highest position limit available
pursuant to Options 9, Section 13 and exercise limit pursuant to
Options 9, Section 15) 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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\10\ See supra note 4, IBIT Approval Order, 89 FR 78946.
\11\ See id.
\12\ 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 Options 9, Sections 13
and 15 to IBIT options utilizing November 25, 2024 data. See
Securities Exchange Act Release No. 103678 (August 11, 2025), 90 FR
39233 (August 14, 2025) (SR-Phlx-2025-34) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend Options
9, Section 13 (Position Limits) and Options 8, Section 34 (FLEX
Index, Equity and Currency Options) Regarding Options on Certain
Exchange-Traded Products Holding Bitcoin).
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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 exchange 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 Options 9, Section 13(g)(i), which requires
that, for the most recent six-month period, trading volume for the
underlying security be at least 100 million shares.\13\ As of February
11, 2026, ISE observed that the market capitalization for IBIT was
52,661,063,818 \14\ with an average daily volume (``ADV''), for the
preceding 6 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.\15\
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\13\ Options 9, Section 13(g), Equity Option Position Limits,
provides that to be eligible for the 250,000 contract limit, an
underlying stock or Exchange-Traded Fund Share must have a trading
volume of at least 100,000,000 shares during the most recent six-
month trading period or a trading volume of at least 75,000,000
shares during the most recent six-month trading period and at least
300,000,000 shares currently outstanding.
\14\ 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
<a href="https://www.ishares.com/us/products/333011/ishares-Bitcoin-trust-etf">https://www.ishares.com/us/products/333011/ishares-Bitcoin-trust-etf</a>.
\15\ These figures were from February 11, 2026.
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In addition to IBIT's Options 9, Section 13(g)(i) eligibility for
1,000,000 contracts, 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 Corporation
(``OCC'').\16\ This pool of data took into consideration 3,797 options
on single stock securities, excluding broad based ETFs.\17\ Next, the
data was aggregated 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 \18\ 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 greater than or equal to
2,000,000).\19\ 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 \20\ with an ADV, for the preceding 180 days
prior to February 11, 2026, of 61,803,035 shares.
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\16\ The computations were based on OCC data from February 11,
2026. Data displaying zero values in market capitalization or ADV
were removed.
\17\ IBIT has one asset and therefore is not comparable to a
broad-based ETF where there are typically multiple components.
\18\ The standard deviation added limited utility to the
analysis given the heavily skewed distribution of market
capitalizations in the single stock securities.
\19\ These buckets were based on OCC's current positions limits.
See <a href="https://www.theocc.com/market-data/market-data-reports/series-and-trading-data/position-limits">https://www.theocc.com/market-data/market-data-reports/series-and-trading-data/position-limits</a>. Options 9, Section 13(g) 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.
\20\ Net Asset Value of $38.29 multiplied by the number of
shares outstanding 1,337,920,000. This figure was acquired as of
February 11, 2026. See <a href="https://www.ishares.com/us/products/333011/ishares-Bitcoin-trust-etf">https://www.ishares.com/us/products/333011/ishares-Bitcoin-trust-etf</a>.
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BILLING CODE 8011-01-P
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[GRAPHIC] [TIFF OMITTED] TN21MY26.003
BILLING CODE 8011-01-C
Based on the above table, if IBIT were compared to the 10 stocks
that had position limits of 750,000 contracts to 1.25 million contracts
it would have ranked 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\ 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. Below are various linear models utilizing
market capitalization and ADV as well as a two-factor model to
determine the appropriate coefficients when both metrics are
incorporated into the same model.\22\
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\21\ ISE utilized Excel's Data Analysis Package to model the
position limit.
\22\ See id.
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BILLING CODE 8011-01-P
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[GRAPHIC] [TIFF OMITTED] TN21MY26.005
Figure 1 utilized IBIT's market capitalization of 52,661,063,818 to
arrive at a modeled position limit of 1,707,654.
[GRAPHIC] [TIFF OMITTED] TN21MY26.004
[[Page 30012]]
Figure 2 utilized IBIT's ADV of 61,803,035 to arrive at a modeled
position limit of 5,672,081. Based on the aforementioned analysis, ISE
noted that the proposed 1,000,000-contract position and exercise limits
are appropriate.
[GRAPHIC] [TIFF OMITTED] TN21MY26.006
BILLING CODE 8011-01-C
Figure 3 shows the results of constructing a two-factor model that
employed both metrics (180-day ADV and market capitalization). The
result was a modeled position limit of 4,952,107.\23\
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\23\ See id.
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Second, ISE reviewed IBIT's data relative to the market
capitalization of the entire Bitcoin market in terms of exercise risk
and availability of deliverables. As of February 11, 2026, there were
approximately 20.5 million Bitcoins in circulation.\24\ At a price of
$66,938,\25\ that equates to a market capitalization of greater than
$1.374 trillion US. If a position limit of 1,000,000 contracts were
considered, the exercisable risk would represent 7.474% \26\ of the
shares outstanding of IBIT. Since IBIT has a creation and redemption
process managed through the issuer, the position limit was compared to
the total market capitalization of the entire Bitcoin market and in
that case, the exercisable risk for options on IBIT represented 0.278%
of all Bitcoin outstanding.\27\ Assuming a scenario in which all
options on IBIT shares were exercised given the proposed 1,000,000-
contract position limit (and exercise limit), it 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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\24\ See <a href="https://www.coingecko.com/en/coins/Bitcoin">https://www.coingecko.com/en/coins/Bitcoin</a>.
\25\ This was the approximate price of Bitcoin from February 11,
2026.
\26\ This percentage was arrived at with this equation:
(1,000,000 contract limit * 100 share per option/1,337,920,000
shares outstanding).
\27\ 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, ISE reviewed the proposed position limit by comparing it to
position limits for derivative products
[[Page 30013]]
regulated by the Commodity Futures Trading Commission (``CFTC''). While
the CFTC, through the relevant Designated Contract Markets, only
regulates options positions based upon delta equivalents (creating a
less stringent standard), ISE examined equivalent bitcoin futures
position limits. In particular, ISE looked to the CME bitcoin futures
contract \28\ that had a position limit of 2,000 futures.\29\ On
February 11, 2026, CME bitcoin futures settled at $67,71570,406.33.\30\
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 were 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 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).\31\
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.\32\ 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, ISE noted that the proposed 1,000,000-contract position and
exercise limits are appropriate.
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\28\ CME Bitcoin Futures are described in Chapter 350 of CME's
Rulebook.
\29\ See the Position Accountability and Reportable Level Table
in the Interpretations & Special Notices Section of Chapter 5 of
CME's Rulebook.
\30\ 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.
\31\ See <a href="https://www.cmegroup.com/education/courses/market-regulation/position-limits/position-limits-aggregation-of-contracts-and-table.htm">https://www.cmegroup.com/education/courses/market-regulation/position-limits/position-limits-aggregation-of-contracts-and-table.htm</a>.
\32\ Id.
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Fourth, 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'').\33\ GLD had a
float of 377 million shares \34\ and a position limit of 250,000
contracts. SLV had a float of 552 million shares \35\ and a position
limit of 250,000 contracts. Finally, BITO had 200.89 million shares
outstanding \36\ 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 a
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% \37\ of the float of IBIT. Consequently,
the 1,000,000-contract proposed IBIT options position and exercise
limits are more conservative than the standards applied to GLD, SLV and
BITO, and appropriate.
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\33\ GLD, SLV and BITO each hold one asset in trust similar to
IBIT.
\34\ 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>.
\35\ See <a href="https://www.ishares.com/us/products/239855/ishares-silver-trust-fund">https://www.ishares.com/us/products/239855/ishares-silver-trust-fund</a>.
\36\ See <a href="https://www.marketwatch.com/investing/fund/bito">https://www.marketwatch.com/investing/fund/bito</a>.
\37\ 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, ISE noted that IBIT began trading in penny increments as of
January 2, 2025 pursuant to the Penny Interval Program.\38\ 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.\39\ 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 has experienced 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.\40\ IBIT options are among a select group of products that
have achieved a certain level of liquidity, which has garnered them the
ability to trade in finer increments. Failing to increase position and
exercise limits for IBIT options, which trade in finer increments, may
artificially inhibit liquidity and create price inefficiency. 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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\38\ The Exchange may add to the Penny Program a newly listed
option class provided that (i) it is among the 300 most actively
traded multiply listed option classes, as ranked by National Cleared
Volume at OCC, in its first full calendar month of trading and (ii)
the underlying security is priced below $200 or the underlying index
is at an index level below $200. Any option class added under this
provision will be added on the first trading day of the month after
it qualifies and will remain in the Penny Program for one full
calendar year, after which it will be subject to the Annual Review
described in Supplementary Material .01(b) to Options 3, Section 3.
The Exchange may add any option class to the Penny Program, provided
that (i) it is among the 75 most actively traded multiply listed
option classes, as ranked by National Cleared Volume at OCC, in the
past six full calendar months of trading and (ii) the underlying
security is priced below $200 or the underlying index is at an index
level below $200. Any option class added under this provision will
be added on the first trading day of the second full month after it
qualifies and will remain in the Penny Program for the rest of the
calendar year, after which it will be subject to the Annual Review
as described in Supplementary Material .01(b) to Options 3, Section
3. See Supplementary Material .01 to Options 3, Section 3.
\39\ 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'').
\40\ Id. at 19548.
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IBIT options have more than sufficient liquidity to garner an
increased position and exercise limit of 1,000,000 contracts. Any
concerns related to manipulation and protection of investors are
mollified by the significant liquidity provision in IBIT. As a general
principle, increases in active trading volume and deep liquidity of the
underlying securities do not lead to manipulation and/or disruption.
Increasing the position (and exercise) limits for 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 member that
maintains positions in impacted options
[[Page 30014]]
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.\41\ Moreover, the Exchange's requirement that
members file reports with the Exchange for any customer who held
aggregate large long or short positions on the same side of the market
of 200 or more option contracts of any single class for the previous
day will remain at this level and will continue to serve as an
important part of the Exchange's surveillance efforts.\42\
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\41\ OCC through the Large Option Position Reporting (``LOPR'')
system acts as a centralized service provider for Member compliance
with position reporting requirements by collecting data from each
Member, consolidating the information, and ultimately providing
detailed listings of each Member'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'').
\42\ Each member (other than an Exchange market-maker using the
OCC model) that holds or carries an account that relies on this
exemption shall report, in accordance with Options 6E, Section 2,
all equity option positions (including those that are delta neutral)
that are reportable thereunder. Each such member on its own behalf
or on behalf of a designated aggregation unit pursuant to section
(n)(1)(d) herein shall also report, in accordance with Options 6E,
Section 2, for each such account that holds an equity option
position subject to this exemption in excess of the levels specified
in this Rule, the net delta and the options contract equivalent of
the net delta of such position. See Options 9, Section 13(n)(i)(g).
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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,\43\ 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 a member must maintain for a large
position held by itself or by its customer.\44\ In addition, Rule 15c3-
1 \45\ imposes a capital charge on members to the extent of any margin
deficiency resulting from the higher margin requirement.
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\43\ 17 CFR 240.13d-1.
\44\ See Options 6C, Section 3 regarding margin requirements.
\45\ 17 CFR 240.15c3-1.
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Technical Amendments
The Exchange proposes to combine the rule text in Options 9,
Section 13(n)(i)(f) and (g) and to re-letter Options 9, Section
13(n)(i)(h) as ``g.''
Margin
Currently, Options 6C, Section 3, Proper and Adequate Margin,
provides at subparagraph (b) that a member organization must elect to
be bound by the initial and maintenance margin requirements of either
the Chicago Board Options Exchange (``CBOE'') or New York Stock
Exchange (``NYSE'') as the same may be in effect and amended from time
to time. The Exchange proposes to update Cboe's name from ``Chicago
Board Options Exchange'' to ``Cboe Exchange, Inc.''
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\46\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\47\ 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 regulating, clearing, settling,
processing information with respect to, and 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) \48\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\46\ 15 U.S.C. 78f(b).
\47\ 15 U.S.C. 78f(b)(5).
\48\ 15 U.S.C. 78(f)(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 amendment
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
[[Page 30015]]
continue to mitigate concerns regarding potential manipulation of IBIT
options and/or disruption of IBIT upon amending the table of position
limits in Options 9, Section 13 and the exercise limits in Options 9,
Section 15.
Comparing IBIT's data relative to the market capitalization of the
entire Bitcoin market in terms of exercise risk and availability of
deliverables, ISE was able to conclude that if a position limit of
1,000,000 contracts were considered, the exercisable risk would
represent 7.474%\49\ 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 could 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 less than 0.278% of all Bitcoin outstanding.\50\ This
analysis demonstrated that a 1,000,000 contracts position and exercise
limits would be appropriate.
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\49\ 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.
\50\ 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%\51\ 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
appropriate.
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\51\ 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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ISE notes that IBIT began trading in penny increments on January 2,
2025 pursuant to the Penny Interval Program.\52\ 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.\53\ The most actively
traded options classes are included in the Penny Program based on
certain objective criteria (trading volume thresholds and initial price
tests).\54\ 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 because the class has experienced 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.\55\ IBIT options are among a select group of products
that have achieved a certain level of liquidity, which has garnered
them 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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\52\ The Exchange may add to the Penny Program a newly listed
option class provided that (i) it is among the 300 most actively
traded multiply listed option classes, as ranked by National Cleared
Volume at OCC, in its first full calendar month of trading and (ii)
the underlying security is priced below $200 or the underlying index
is at an index level below $200. Any option class added under this
provision will be added on the first trading day of the month after
it qualifies and will remain in the Penny Program for one full
calendar year, after which it will be subject to the Annual Review
described in Supplementary Material .01(b) to Options 3, Section 3.
The Exchange may add any option class to the Penny Program, provided
that (i) it is among the 75 most actively traded multiply listed
option classes, as ranked by National Cleared Volume at OCC, in the
past six full calendar months of trading and (ii) the underlying
security is priced below $200 or the underlying index is at an index
level below $200. Any option class added under this provision will
be added on the first trading day of the second full month after it
qualifies and will remain in the Penny Program for the rest of the
calendar year, after which it will be subject to the Annual Review
as described in Supplementary Material .01(b) to Options 3, Section
3. See Supplementary Material .01 to ISE Options 3, Section 3.
\53\ 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'').
\54\ 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.
\55\ Id. at 19548.
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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.
Technical Amendments
The Exchange's proposal to combine the rule text in Options 9,
Section 13(n)(i)(f) and (g) and to re-letter Options 9, Section
13(n)(i)(h) as ``g'' is non-substantive. Additionally, the amendment to
Options 6C, Section 3 to change Cboe's name is a non-substantive
amendment.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
The Exchange does not believe 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
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 members would be subject to the position limits in Options
9, Section 13 and corresponding exercise limits in Options 9, Section
15. 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.
Technical Amendments
The Exchange's proposals to combine the rule text in Options 9,
Section 13(n)(i)(f) and (g), re-letter Options 9, Section 13(n)(i)(h)
as ``g,'' and change Cboe's name at Options 6C, Section 3 are non-
substantive amendments.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
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
[[Page 30016]]
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 \56\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\57\
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\56\ 15 U.S.C. 78s(b)(3)(A)(iii).
\57\ 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) \58\ 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 ISE's IBIT options position
and exercise limits.\59\ 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.\60\
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\58\ 17 CFR 240.19b-4(f)(6)(iii).
\59\ See supra note 4 and accompanying text.
\60\ 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.
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#e391968f86ce808c8e8e868d9790a3908680cd848c95"><span class="__cf_email__" data-cfemail="9ae8eff6ffb7f9f5f7f7fff4eee9dae9fff9b4fdf5ec">[email protected]</span></a>. Please include
file number SR-Phlx-2026-29 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-Phlx-2026-29. 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-Phlx-2026-29 and should be submitted on or
before June 11, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\61\
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\61\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-10140 Filed 5-20-26; 8:45 am]
BILLING CODE 8011-01-P
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