SEC Approves Nasdaq Rule Change

The U.S. Securities and Exchange Commission (SEC) has approved a rule change that allows Nasdaq's International Securities Exchange (ISE) to list and trade options on the iShares Bitcoin Trust (IBIT). BlackRock's widely-traded exchange-traded fund (ETF) is now set to gain even more traction with this new derivative product.

Expanding Bitcoin Derivatives

This decision marks another step in expanding the range of derivative products linked to Bitcoin. It provides investors additional tools for managing exposure to the world's largest cryptocurrency.

BlackRock had been seeking approval for such a listing since at least March of this year, following the regulator's approval for multiple Bitcoin-linked ETFs in the U.S.

Addressing Market Concerns

The SEC's approval follows several amendments submitted by Nasdaq ISE. These amendments addressed concerns over market manipulation and excessive risk-taking in the fledgling crypto options market.

The approval follows several requests to amend rule changes to allow for listing options tied to Bitcoin and Ethereum ETFs in the U.S., which have faced resistance over market stability concerns.

Conservative Position Limits

A key amendment sets position and exercise limits for options on IBIT at 25,000 contracts. According to SEC filing records, the exchange described this limit as "extremely conservative" given the size of the market and the trust's liquidity.

Options on IBIT will be physically settled and feature American-style exercise, offering a hedge for investors looking to manage Bitcoin-related risks.

"Options on IBIT will be physically settled and feature American-style exercise, offering a hedge for investors looking to manage Bitcoin-related risks."

High Investor Interest

BlackRock's ETF, which tracks the price of Bitcoin, has attracted significant attention from retail and institutional investors since its launch earlier this year.

It has become one of the most liquid Bitcoin-related products in the U.S. market. Despite the approval, the SEC's move comes amid ongoing concerns about the potential risks associated with cryptocurrency derivatives.

Market Stability Concerns

Comment letters submitted during the review process highlighted worries over market volatility and the broader integration of crypto into traditional financial markets.

Some urged the SEC to delay approval until the Bitcoin market stabilized further. Nonetheless, the approval signifies a significant milestone in Bitcoin's ongoing evolution as a mainstream financial asset.