Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Rules Regarding the Position and Exercise Limits for Options on the iShares Bitcoin Trust ETF, Grayscale Bitcoin Trust ETF, Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-103663; File No. SR-CBOE-2025-056]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Rules Regarding the Position and Exercise Limits for Options on the iShares Bitcoin Trust ETF, Grayscale Bitcoin Trust ETF, Grayscale Bitcoin Mini Trust BTC, and the Bitwise Bitcoin ETF</SUBJECT> <HD SOURCE="HD1">August 8, 2025.</HD> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on August 6, 2024, Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <HD SOURCE="HD1">I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change</HD> Cboe Exchange, Inc. (the “Exchange” or “Cboe Options”) proposes to amend its Rules regarding the position and exercise limits for options on iShares Bitcoin Trust ETF (“IBIT”), Grayscale Bitcoin Trust ETF (“GBTC”), Grayscale Bitcoin Mini Trust BTC (“BTC”), and the Bitwise Bitcoin ETF (“BITB”) (collectively, the “Bitcoin ETFs”). The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange's website ( <E T="03">http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx</E> ), and at the Exchange's Office of the Secretary. <HD SOURCE="HD1">II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> 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. <HD SOURCE="HD2">A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> The Exchange proposes to amend its Rules regarding the position and exercise limits for options on the Bitcoin ETFs. Specifically, the proposed rule change amends Rule 8.30, Interpretation and Policy .10 to delete the 25,000 contract position limit for each Bitcoin ETF option. As a result, the position limit for each Bitcoin ETF option would be determined in accordance with Rule 8.30, Interpretation and Policy .07 and be based on trading in each Bitcoin ETF during the most-recent six-month period. <SU>3</SU> <FTREF/> <FTNT> <SU>3</SU>  Pursuant to Rule 8.42, Interpretation and Policy .02, the exercise limits for options on the Bitcoin ETFs are equivalent to the position limits prescribed for such options in current Rule 8.30, Interpretation and Policy .10. Therefore, currently, the exercise limit for each Bitcoin ETF option is 25,000 contracts. The proposed rule change would modify the exercise limit for each Bitcoin ETF option to be equivalent to the position limit prescribed in Rule 8.30, Interpretation and Policy .07 (which may be 25,000, 50,000, 75,000, 200,000, or 250,000, depending on the six-month trading volume or the six-month trading volume and outstanding shares of the Bitcoin ETF). </FTNT> Each Bitcoin ETF is an exchange-traded fund (“ETF”) that holds Bitcoin and is listed on a national equities exchange. <SU>4</SU> <FTREF/> On November 22, 2024, the Securities and Exchange Commission (the “Commission”) noticed the Exchange's filing and immediate effectiveness of a proposed rule change to list and trade IBIT, GBTC, BTC, and BITB options. <SU>5</SU> <FTREF/> The position and exercise limits for each Bitcoin ETF option are 25,000 contracts, the lowest limit available in equity options. <SU>6</SU> <FTREF/> <FTNT> <SU>4</SU>  Nasdaq received approval to list and trade Bitcoin-Based Commodity-Based Trust Shares in IBIT pursuant to Rule 5711(d) of Nasdaq. <E T="03">See</E> 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. NYSE Arca received approval to list and trade Bitcoin-Based Commodity-Based Trust Shares in GBTC, BTC, and BITB pursuant to NYSE Arca Rule 8.201-E(c)(1). <E T="03">See</E> Securities Exchange Act Release Nos. 99306 (January 10, 2024), 89 FR 3008 (January 17, 2024) (Order Granting Accelerated Approval of Proposed Rule Changes, as Modified by Amendments Thereto, to list and trade options on, among other ETFs, GBTC) (SR-NYSEARCA-2021-90); 100610 (July 26, 2024) (order approving listing and trading of Commodity-Based Trust Shares of BTC, among other ETFs), 89 FR 62821 (August 1, 2024) (SR-NYSEARCA-2023-45); and 99306 (January 10, 2024), 89 FR 3008 (January 17, 2024) (order approving listing and trading of Commodity-Based Trust Shares of BITB, among other ETFs) (SR-NYSEARCA-2021-90). </FTNT> <FTNT> <SU>5</SU>   <E T="03">See</E> Securities Exchange Act Release No. 101711 (November 22, 2024), 89 FR 94846 (November 29, 2024) (SR-CBOE-2024-051) (“Bitcoin ETF Options Notice”). </FTNT> <FTNT> <SU>6</SU>   <E T="03">See</E> Rules 8.30, Interpretation and Policy .10 and 8.42, Interpretation and Policy .02. </FTNT> 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 benefit the options positions.”  <SU>7</SU> <FTREF/> 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.”  <SU>8</SU> <FTREF/> Based on its review of the data and analysis provided by the Exchange, the Commission concluded that the 25,000 contract position limit for non-FLEX Bitcoin ETF options satisfied these objectives. <SU>9</SU> <FTREF/> <FTNT> <SU>7</SU>   <E T="03">See</E> Securities Exchange Act Release No. 101128 (September 20, 2024), 89 FR 78942, 78946 (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) (“IBIT Options Approval Order”). </FTNT> <FTNT> <SU>8</SU>   <E T="03">Id.</E> </FTNT> <FTNT> <SU>9</SU>   <E T="03">Id.;</E> Securities Exchange Act Release Nos. 101386 (October 18, 2024), 89 FR 84960 (October 24, 2024) (SR-NYSEAMER-2024-49) (the “GBTC, BTC, and BITB Options Approval Order”). </FTNT> While the Exchange proposed a 25,000 contract position limit for each Bitcoin option in its rule filings to list and trade these options, the Exchange nonetheless believed that evidence existed to support a much higher position limit. Specifically, when initially approving Bitcoin ETF options trading, the Commission considered and reviewed data and analysis of Nasdaq ISE, LLC (“ISE”) (with respect to IBIT options) and NYSE American, LLC (“NYSE American”) (with respect to GBTC, BTC, and BITB options) when initially approving for listing the Bitcoin ETF options that the exercisable risk associated with a position limit of 25,000 contracts represented only 0.4% of the outstanding shares of IBIT;  <SU>10</SU> <FTREF/> 0.9% of the outstanding shares of GBTC; 0.7% of the outstanding shares of BTC; and 3.6% of the outstanding shares of BITB. <SU>11</SU> <FTREF/> The Commission also considered and reviewed ISE's and NYSE American's statements, as applicable, that with a position limit of 25,000 contracts on the same side of the market for each Bitcoin ETF option: (1) with 611,040,000 shares of IBIT outstanding, 244 market participants would have to simultaneously exercise their positions to place IBIT under stress;  <SU>12</SU> <FTREF/> (2) with 284,570,100 shares of GBTC outstanding, 114 market participants would have to simultaneously exercise their positions to place GBTC under stress; (3) with 366,950,100 shares of BTC outstanding, 147 market participants would have to simultaneously exercise their positions to place BTC under stress; and (4) with 68,690,000 shares of BITB outstanding, 27 market participants would have to simultaneously exercise their positions to place BITB under stress. <SU>13</SU> <FTREF/> Based on the Commission's review of this information and analysis, the Commission concluded that the 25,000-contract position and exercise limit for each of IBIT, GBTC, BTC, and BITB options were designed 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, and 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 benefit the options position. <SU>1 ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 56k characters. 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