BlackRock, Fidelity, Grayscale: why the SEC's rule change on Nasdaq could trigger a crypto derivatives boom

Source: Yellow Original Title: BlackRock, Fidelity, Grayscale: why the SEC’s rule change on Nasdaq could trigger a crypto derivatives boom

Original Link: Nasdaq has formally requested the U.S. Securities and Exchange Commission (SEC) to approve a rule change that would remove historical position and exercise limits on options linked to physically-backed Bitcoin (BTC) and Ethereum (ETH) ETFs, a move that could significantly expand institutional participation in crypto-linked derivatives markets.

In a submission to the SEC earlier this week, Nasdaq proposed removing the current cap of 25,000 contracts applied to crypto ETF options.

The exchange argues that these products now meet the same standards of liquidity, market capitalization, and oversight as other commodity-based ETF options and should therefore be regulated under the same framework.

Boost to align crypto ETF options with traditional products

Nasdaq’s proposal aims to treat options on physically-backed Bitcoin and Ethereum ETFs the same way as options linked to commodities like gold or oil.

According to the document, the existing limits were introduced when crypto ETFs were new and unproven, but market conditions have evolved since then.

The exchange stated that trading volumes, assets under management, and price discovery in the underlying ETFs have reached levels that support broader and more sophisticated options activity.

Removing the limits, Nasdaq argued, would improve market efficiency without introducing new systemic risks.

Institutional demand drives the proposal

Options markets are a key tool for institutional investors, who use them for hedging, volatility strategies, and structured products. The current position limits have restricted asset managers, hedge funds, and market makers from deploying capital at scale, even as demand for regulated crypto exposure grows.

If approved, the change would allow larger options positions linked to ETFs issued by firms like BlackRock, Fidelity, Ark Invest, VanEck, Grayscale, and Bitwise, reflecting the range of products that would be affected.

A test of the SEC’s regulatory stance

The proposal places the decision directly in the hands of the SEC, which must determine whether options on crypto-linked ETFs should continue to face specific restrictions or be fully integrated into existing derivatives regulation.

Although the agency has approved physically-backed Bitcoin and Ethereum ETFs in the past year, derivatives linked to those products have remained subject to stricter controls.

Nasdaq’s submission effectively challenges that distinction, arguing that oversight mechanisms, including information sharing agreements and clearinghouse risk management, are already sufficient.

Implications for the structure of the crypto market

Approval would not introduce new crypto ETFs nor directly expand retail access. Instead, it would deepen the layer of derivatives underpinning regulated crypto exposure in U.S. markets.

A more robust options trading environment typically supports liquidity, tighter spreads, and more sophisticated risk management—factors that tend to anchor institutional capital over longer market cycles.