Notice2026-11380
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 8.30 (Position Limits), Interpretation and Policy .07, 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
June 8, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 109 (Monday, June 8, 2026)</title>
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[Federal Register Volume 91, Number 109 (Monday, June 8, 2026)]
[Notices]
[Pages 34697-34702]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-11380]
[[Page 34697]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105604; File No. SR-CBOE-2026-048]
Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Rule 8.30 (Position Limits), Interpretation and Policy .07, To Increase
the Position and Exercise Limits for Options on iShares Bitcoin Trust
ETF
June 3, 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 20, 2026, Cboe Exchange, Inc. (``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 Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to amend Rule 8.30 (Position Limits), Interpretation and Policy .07 to
increase the position and exercise limits \5\ for options on iShares
Bitcoin Trust ETF (``IBIT''). The text of the proposed rule change is
provided in Exhibit 5.
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\5\ Pursuant to Rule 8.42, Interpretation and Policy .02, the
exercise limit for options on IBIT will be equivalent to this
proposed position limit.
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The text of the proposed rule change is also available on the
Commission's website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>), the
Exchange's website (<a href="https://www.cboe.com/us/options/regulation/rule_filings/bzx/">https://www.cboe.com/us/options/regulation/rule_filings/bzx/</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 Rule 8.30 (Position Limits),
Interpretation and Policy .07 to increase the position and exercise
limits for options on IBIT.
IBIT is an Exchange-Traded Fund (``ETF'') that holds Bitcoin and is
listed on The Nasdaq Stock Market LLC.\6\ On November 22, 2024, the
Securities and Exchange Commission (the ``Commission'') issued a notice
of filing and immediate effectiveness of the Exchange's proposed rule
change to list and trade IBIT options.\7\ The position and exercise
limits for IBIT options are currently set as stated in Rule 8.30,
Interpretation and Policy .07 and Rule 8.42.\8\
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\6\ Nasdaq received approval to list and trade Bitcoin-Based
Commodity-Based Trust Shares in IBIT pursuant to Rule 5711(d) of
Nasdaq. See Securities Exchange Act Release No. 99306 (January 10,
2024), 89 FR 3008 (January 17, 2024) (SR-NASDAQ-2023-016) (Order
Granting Accelerated Approval of Proposed Rule Changes, as Modified
by Amendments Thereto, To List and Trade Bitcoin-Based Commodity-
Based Trust Shares and Trust Units). IBIT started trading on January
11, 2024.
\7\ See Securities Exchange Act Release No. 101711 (November 22,
2024), 89 FR 94846 (November 29, 2024) (SR-CBOE-2025-051) (``IBIT
Approval Order''). Cboe began trading IBIT options on November 19,
2024.
\8\ IBIT currently has a position limit of 250,000 contracts
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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 Rule 8.30, Interpretation and Policy .07 and Rule 8.42, 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 and exercise limits for options on IBIT to 1,000,000 contracts
by noting the proposed position limit in Rule 8.30, Interpretation and
Policy .07. Additionally, pursuant to Rule 8.42, Interpretation and
Policy .02, the exercise limit for options on IBIT will be equivalent
to this proposed position limit. This proposed rule change is based on
a proposal submitted by the Nasdaq ISE, LLC (``ISE''), which was
recently approved by the Commission.\9\ In considering the appropriate
position and exercise limits for IBIT, the Exchange reviewed the data
presented by ISE in the ISE Approval.
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\9\ See Securities Exchange Act Release No. 105317 (April 27,
2026), 91 FR 23333 (April 30, 2026) (SR-ISE-2025-26) (``ISE
Approval'').
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The position limit for options on IBIT is currently set pursuant to
Rule 8.30, Interpretation and Policy .07 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 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 for disruption of the options market itself,
especially in illiquid classes.\10\
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\10\ 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
[[Page 34698]]
benefit the options positions.'' \11\ For this reason, the Commission
requires that ``position and exercise limits must be sufficient to
prevent investors from disrupting the market for the underlying
security by acquiring and exercising a number of options contracts
disproportionate to the deliverable supply and average trading volume
of the underlying security.'' \12\ The Exchange believes the current
position limit and exercise limit of 250,000 contracts (the highest
position limit available pursuant to Rule 8.30, Interpretation and
Policy .07 (and exercise limit pursuant to Rule 8.42) 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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\11\ 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) (``ISE IBIT Approval Order'').
\12\ See id.
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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 Rule 8.30, Interpretation and Policy .07,
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, 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 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\ Rule 8.30, Interpretation and Policy .02(e) provides that
to be eligible for the 250,000 contract limit, either the most
recent six (6) month trading volume of the underlying security must
have totaled at least 100 million shares or the most recent six-
month trading volume of the underlying security must have totaled at
least seventy-five (75) million shares and the underlying security
must have at least 300 million shares currently outstanding.
\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 are from February 11, 2026.
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In addition to IBIT's Rule 8.30, Interpretation and Policy .07
eligibility for 1,000,000 contracts, the Exchange reviewed the data
presented by ISE in the ISE Approval. First, ISE considered IBIT's
market capitalization and ADV, and prospective position limit in
relation to other securities. In measuring IBIT against other
securities, ISE aggregated market capitalization and volume data for
securities that have defined position limits utilizing data from The
Options Clearing Corporations (``OCC'').\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, 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\ These computations were based on OCC data from February 11,
2026. ISE represented 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/marketdata/market-data-reports/series-and-trading-data/position-limits">https://www.theocc.com/marketdata/market-data-reports/series-and-trading-data/position-limits</a>. Rule 8.30, Interpretation and
Policy .02 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 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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Based on ISE's data analysis, if IBIT were compared to the 10
stocks that have position limits of 750,000 contracts to 1.25 million
contracts it would rank in the 45th percentile for market
capitalization and the 89th percentile for ADV.
ISE also analyzed the position limits for IBIT by regressing the
median elements from each bucket of market capitalization and 180-day
ADV of all non-ETF equities, against their respective position limit
figures. From this regression, ISE was able to determine the implied
coefficients to create a formulaic method for determining an
appropriate position limit.\21\ 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. The Exchange reviewed ISE's analysis which
set forth 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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ISE's analysis utilized IBIT's market capitalization of
52,661,063,818 to arrive at a modeled position limit of 1,707,654, and
utilized IBIT's ADV of 61,803,035 to arrive at a modeled position limit
of 5,672,081. Based on the aforementioned analysis, the Exchange
believes that the proposed 1,000,000 contracts position and exercise
limit is appropriate. Finally, ISE's analysis illustrated the results
when constructing a two-factor model employing both metrics (180-day
ADV and market capitalization); the result is 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 set forth in the ISE
[[Page 34699]]
Approval, 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 outstanding shares
outstanding of IBIT. Since IBIT has a creation and redemption process
managed through the issuer, the position limit can be compared to the
total market capitalization of the entire Bitcoin market and in that
case, the exercisable risk for options on IBIT would represent 0.278%
of all Bitcoin outstanding.\27\ Assuming a scenario where all options
on IBIT shares were exercised given the proposed 1,000,000-contract
position limit (and exercise limit), this would have a virtually
unnoticed impact on the entire Bitcoin market. This analysis
demonstrates that the proposed 1,000,000 per same side position and
exercise limit is appropriate for options on IBIT given its liquidity.
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\24\ See <a href="https://www.coingecko.com/en/coins/Bitcoin">https://www.coingecko.com/en/coins/Bitcoin</a>.
\25\ This is the approximate price of Bitcoin from February 11,
2026.
\26\ This percentage is 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 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 has 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 was utilized. Since substantial
portions of any distributed options portfolio is likely to be out of
the money on expiration, an options position limit equivalent to the
CME position limit for bitcoin futures (considering that all options
deltas are <=1.00) should be a bit higher than the CME implied 176,848
limit. Of note, unlike options contracts, CME position limits are
calculated on a net futures-equivalent basis by contract and include
contracts that aggregate into one or more base contracts according to
an aggregation ratio(s).\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, the Exchange believes
that the proposed 1,000,000 contracts position and exercise limit is
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\ Per the
analysis, GLD has a float of 377 million shares \34\ and a position
limit of 250,000 contract. SLV has a float of 552 million shares,\35\
and a position limit of 250,000 contracts. Finally, BITO has 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 proposed IBIT options position and exercise
limit is generally aligned with 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 is arrived at with this equation:
(1,000,000 contract limit * 100 share per option/1,337,920,000
shares outstanding). This information was captured on February 11,
2026.
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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 benefited 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 experienced a significant growth in investor
interest) to quote in finer trading increments, which in turn should
benefit market
[[Page 34700]]
participants by reducing the cost of trading such options.\40\ IBIT
options is among a select group of products that have achieved a
certain level of liquidity that have garnered it the ability to trade
in finer increments. Failing to increase position and exercise limits
for IBIT options, now that it is trading in finer increments, may
artificially inhibit liquidity and create price inefficiency. The
Exchange notes that options on iShares MSCI Emerging Markets, iShares
China Large-Cap ETF and iShares MSCI EAFE ETF also trade in penny
increments based on their liquidity.
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\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 Rule 5.4(d). The Exchange may add any option class to
the Penny Program, provided that (i) it is among the 75 most
actively traded multiply listed option classes, as ranked by
National Cleared Volume at OCC, in the past six full calendar months
of trading and (ii) the underlying security is priced below $200 or
the underlying index is at an index level below $200. Any option
class added under this provision will be added on the first trading
day of the second full month after it qualifies and will remain in
the Penny Program for the rest of the calendar year, after which it
will be subject to the Annual Review as described in Rule 5.4(d).
See Rule 5.4(d).
\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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The Exchange believes that IBIT options have more than sufficient
liquidity to garner an increased position and exercise limit of
1,000,000 contracts. The Exchange believes that any concerns related to
manipulation and protection of investors are mollified by the
significant liquidity provision in IBIT. The Exchange states that, as a
general principle, increases in active trading volume and deep
liquidity of the underlying securities do not lead to manipulation and/
or disruption.
The Exchange believes that increasing the position (and exercise)
limits for 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 Trading Permit Holder (``TPH'') organization that maintains
positions in impacted options on the same side of the market, for its
own account or for the account of a customer, report certain
information to the Exchange. This information includes, but would not
be limited to, the options' positions, whether such positions are
hedged and, if so, a description of the hedge(s). Market-Makers would
continue to be exempt from this reporting requirement, however, the
Exchange may access Market-Maker position information.\41\ Moreover,
the Exchange's requirement that TPH organizations 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\ See Rule 8.43(a).
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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 Chapter 10 of the Exchange's rulebook, including Rule
10.3, for a description of margin requirements.
\45\ 17 CFR 240.15c3-1.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\46\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \47\ requirements that the rules of an exchange be
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\ Id.
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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
[[Page 34701]]
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, the proposed change would allow institutional investors to
utilize IBIT options for prudent risk management purposes.
In addition, the Exchange believes that the current liquidity in
IBIT will continue to mitigate concerns regarding potential
manipulation of IBIT options and/or disruption of IBIT upon amending
the table of position limits in Rule 8.30, Interpretation and Policy
.07 and amending the exercise limits via Rule 8.42, Interpretation and
Policy .02.
In reviewing ISE's comparison of IBIT's data relative to the market
capitalization of the entire Bitcoin market in terms of exercise risk
and availability of deliverables, the Exchange 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 can be compared to the total market capitalization of
the entire Bitcoin market and in that case, the exercisable risk for
options on IBIT would represent 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 is arrived at with this equation:
(1,000,000 contract limit * 100 share per option/1,337,920,000
shares outstanding). This information was captured on February 11,
2026.
\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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As noted above, 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 is arrived at with this equation:
(1,000,000 contract limit * 100 share per option/1,337,920,000
shares outstanding). This information was captured on February 11,
2026.
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Also as noted above, 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 a class that experience a significant
growth in investor interest) to quote in finer trading increments,
which in turn should benefit market participants by reducing the cost
of trading such options.\55\ IBIT options are among a select group of
products that have achieved a certain level of liquidity that have
garnered it the ability to trade in finer increments pursuant to the
Penny Interval Program. Failing to permit IBIT options to potentially
increase position and exercise limits given the trading in finer
increments, may artificially inhibit liquidity and create price
inefficiency for IBIT options.
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\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 Rule 5.4(d). The Exchange may add any option class to
the Penny Program, provided that (i) it is among the 75 most
actively traded multiply listed option classes, as ranked by
National Cleared Volume at OCC, in the past six full calendar months
of trading and (ii) the underlying security is priced below $200 or
the underlying index is at an index level below $200. Any option
class added under this provision will be added on the first trading
day of the second full month after it qualifies and will remain in
the Penny Program for the rest of the calendar year, after which it
will be subject to the Annual Review as described in Rule 5.4(d).
See Rule 5.4(d).
\53\ See 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe the proposed rule change will impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because all TPHs would be subject to the same
position and exercise limit for IBIT options, as set by Rules 8.30,
Interpretation and Policy .02 and 8.42. The Exchange does not believe
the proposed rule change will impose any burden on intermarket
competition, and may benefit competition, as the proposed rule change
is identical to the proposed rule change of at least one other options
exchange recently approved by the Commission.\56\ The Exchange believes
that the proposed rule change may provide additional opportunities for
market participants to continue to efficiently achieve their investment
and trading objectives for IBIT options.
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\56\ See ISE Approval.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \57\ and
[[Page 34702]]
subparagraph (f)(6) of Rule 19b-4 thereunder.\58\
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\57\ 15 U.S.C. 78s(b)(3)(A)(iii).
\58\ 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) \59\ 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.\60\ 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.\61\
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\59\ 17 CFR 240.19b-4(f)(6)(iii).
\60\ See supra note 9 and accompanying text.
\61\ 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#f88a8d949dd59b9795959d968c8bb88b9d9bd69f978e"><span class="__cf_email__" data-cfemail="ef9d9a838ac28c8082828a819b9caf9c8a8cc1888099">[email protected]</span></a>. Please include
file number SR-CBOE-2026-048 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-CBOE-2026-048. 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-CBOE-2026-048 and should be submitted on
or before June 29, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\62\
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\62\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-11380 Filed 6-5-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on June 8, 2026.
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.