Nasdaq Exchanges Remove Restrictions on Crypto Asset ETF Options

Two Nasdaq options trading exchanges proposed amending their respective rules to remove specific position limits and trading restrictions on various Bitcoin and Ethereum exchange-traded funds ("ETFs").

In their filings with the SEC (here and here), Nasdaq PHLX LLC ("Phlx") and Nasdaq ISE, LLC ("ISE") explained that the amendments apply to options overlying twelve specific spot Bitcoin and Ethereum ETFs, including those managed by iShares, Grayscale, Fidelity, and Bitwise. The exchanges proposed eliminating the existing 25,000 contract position and exercise limits for these options, subjecting them instead to standard limit rules. In addition, the proposed amendments permit these securities to trade as FLEX Options and remove certain requirements to aggregate FLEX positions with non-FLEX positions for the purpose of calculating limits.

The exchanges stated the proposals were consistent with the Exchange Act because they align the treatment of these crypto assets with other options listed under generic "Commodity-Based Trust" rules. They noted that removing the restrictions "promote[s] just and equitable principles of trade" by ensuring these products are subject to the same regulatory framework as other qualifying options, thereby preventing unfair discrimination between products and market participants.

The SEC waived the standard 30-day operative delay for both filings, making the proposals effective immediately. Comments must be submitted on or before 21 days after publication in the Federal Register.