NYSE exchanges complete industry-wide removal of crypto ETF options caps

NYSE Arca and NYSE American filed rule changes with the Securities and Exchange Commission to remove the 25,000-contract position and exercise limits on options overlying spot bitcoin and ether exchange-traded funds, according to Federal Register notices set to be published Monday.

The SEC waived the standard 30-day waiting period on both filings, making the changes operative upon filing.

The rule changes cover options on 11 crypto ETF products, including BlackRock’s iShares Bitcoin Trust (IBIT), Fidelity’s Wise Origin Bitcoin Fund (FBTC), ARK 21Shares Bitcoin ETF (ARKB), Grayscale’s Bitcoin and Ethereum trusts, and Bitwise’s Bitcoin and Ethereum ETFs. The filings also remove restrictions that had prevented those products from trading as FLEX options, which allow customizable contract terms such as non-standard strike prices and expiration dates.

Position limits for these options will now be determined under each exchange’s standard framework, which sets limits based on trading volume and shares outstanding. Options on large, liquid ETFs can qualify for position limits of 250,000 contracts or more under those rules.

The 25,000-contract cap was put in place as a precautionary measure when crypto ETF options first began trading in November 2024. At the time, analysts flagged the limit as conservative. Bloomberg senior ETF analyst Eric Balchunas noted on IBIT’s first day of options trading that the fund generated nearly $1.9 billion in notional exposure despite the constraint.

In October 2024, Kbit CEO Ed Tolson told The Block that the cap was not overly restrictive given the existing $40 billion in bitcoin open interest across futures and perpetual swaps. But the limit was notably out of step with how other commodity ETF options were treated, and multiple exchanges began moving to remove it earlier this year.

Nasdaq ISE and Nasdaq PHLX filed to lift the restrictions in January. MIAX followed the same month. MEMX filed in February. Cboe filed its own version in March. With NYSE Arca and NYSE American now in, every major U.S. options exchange has completed the transition.

The SEC noted that the proposals do not introduce novel regulatory issues, pointing to the identical changes already in effect at rival exchanges.

The shift has implications for institutional market participants in particular. Removing position caps enables more efficient hedging strategies, basis trades, and overlay programs. Access to FLEX options allows institutions to negotiate bespoke contract terms for structured products, a feature that was already available for comparable commodity ETFs like the SPDR Gold Trust (GLD) and iShares Silver Trust (SLV).

Separately, Nasdaq ISE has a pending proposal to raise IBIT-specific options position limits to 1 million contracts, which the SEC is still reviewing. That filing, currently on its fifth amendment, would bring IBIT closer to parity with the largest equity ETFs.

The comment period for both NYSE filings closes April 13.