FR-2026-11380 — 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

[Federal Register Volume 91, Number 109 (Monday, June 8, 2026)]

[Notices]

[Pages 34697-34702]

From the Federal Register Online via the Government Publishing Office [ www.gpo.gov ]

[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 ( https://www.sec.gov/rules/sro.shtml ), the

Exchange's website ( https://www.cboe.com/us/options/regulation/rule_filings/bzx/ ), 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

https://www.ishares.com/us/products/333011/ishares-Bitcoin-trust-etf .

\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 https://www.theocc.com/marketdata/market-data-reports/series-and-trading-data/position-limits . 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 https://www.ishares.com/us/products/333011/ishares-Bitcoin-trust-etf .

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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 https://www.coingecko.com/en/coins/Bitcoin .

\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 https://www.cmegroup.com/education/courses/market-regulation/position-limits/position-limits-aggregation-of-contracts-and-table.htm .

\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 https://www.ssga.com/us/en/intermediary/etfs/spdr-gold-shares-gld .

\35\ See https://www.ishares.com/us/products/239855/ishares-silver-trust-fund .

\36\ See https://www.marketwatch.com/investing/fund/bito

\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

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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