The U.S. Securities and Exchange Commission (SEC) recently published a Nasdaq rule filing aimed at removing position and exercise limits for options on spot Bitcoin and Ethereum ETFs. While widely interpreted on social media as excluding certain crypto assets from over-the-counter (OTC) rules, the reality is that this rule adjustment primarily targets exchange-listed options products, not the OTC market.
This proposal seeks to eliminate the 25,000-contract position and exercise limits for multiple Bitcoin and Ethereum ETF options products. Previously, this restriction capped the number of contracts a single entity could hold or exercise, effectively limiting total exposure to crypto ETF options to a level far below that permitted for options on similar commodity funds.
Products Affected and Rationale for Limits
The ETFs involved in this filing come from six major issuers: BlackRock, Fidelity, Bitwise, Grayscale, ARK/21Shares, and VanEck. These are among the most actively traded spot Bitcoin and Ethereum ETFs in the U.S. market.
The establishment of options position limits was intended to prevent market manipulation and excessive risk concentration. The 25,000-contract cap was set when crypto ETF options first launched, reflecting regulators' cautious approach to this emerging asset class. However, as these products have matured and liquidity has increased, the limit has become a constraint, while similar options on non-crypto commodity ETFs do not face such restrictions.
Nasdaq's filing argues that removing these limits would align the regulatory treatment of crypto ETF options with that of other commodity fund options. Although the SEC retains the power to suspend the rule change within 60 days, the alteration takes effect immediately upon filing.
The public comment period for this proposal closes on February 17, 2026.
Clarification: Not an OTC Market Rule Adjustment
Headlines circulating on Telegram and social media have suggested that the SEC is excluding certain crypto assets from "certain OTC market rules." However, according to the original filing, this interpretation is inaccurate.
The over-the-counter (OTC) market and exchange-listed options markets operate under different regulatory frameworks. OTC rules apply to bilateral trades conducted outside of exchanges, typically involving dealer networks and non-standardized contracts. Nasdaq's filing, conversely, pertains solely to listed options on regulated exchanges.
No official statements supporting the exclusion of crypto assets from OTC market rules have been found in the official documents referenced for this report (including SEC, FINRA, or the Federal Register). This confusion likely stems from an overly broad interpretation of a narrower, yet significant, regulatory adjustment.
Traders and investors following this matter should focus on the actual content of the filing rather than exaggerated versions circulating online. The adjustment itself is substantial and does not require the added context of OTC market rule changes.
Significance of Removing Position Limits for the Crypto ETF Market
Position limits directly impact the scale of capital that institutional investors can deploy through options strategies. The 25,000-contract limit...