News : Derivatives : Bitcoin

BITCOIN COMES OF REGULATORY AGE

Exchange operator CME Group threw the gauntlet down and launched the first digital currency futures a week before expected. In the first session more than $80m in bitcoin futures changed hands on the world’s biggest exchange operator by market value.

The trading value gave it a slight edge on rival Cboe Global Markets as they vie to be the main hub for the nascent bitcoin futures market.

CME executives say its contract is aimed at institutional investors who have been calling for futures. The larger size of the CME contract means investors will have to pay five times more margin money to backstop their trades.

The Commodity Futures Trading Commission (CFTF), the main US markets regulator, only gave the green light to the two competitors to list bitcoin futures, which was seen as a significant step in allowing mainstream investors to buy and sell the highly volatile cryptocurrency.

The CME and Chicago rival Cboe had agreed to operate under a self-certified regime for their contracts while Cantor Exchange, run by Cantor Fitzgerald, opted to self-certify bitcoin binary options, the CFTC added.

The moves are seen as a watershed for Wall Street professionals – including institutional investors and high-speed traders – who have been keen to bet on cryptocurrencies and their wild swings, but were worried about doing so on mostly unregulated markets.

“Bitcoin, a virtual currency, is a commodity unlike any the commission has dealt with in the past,” CFTC Chairman Chris Giancarlo said in a statement. “We expect that the futures exchanges, through information sharing agreements, will be monitoring the trading activity on the relevant cash platforms. Futures exchanges under such rules are required to monitor for potential market manipulation and market dislocations like sudden drops and trading outages.”

The price of bitcoin has been on a roller coaster ride in recent weeks, surging to an all- time high above $11,000 for the first time, only to drop more than a fifth, and then rebound. Bitcoin was trading below $2,000 as recently as May 2017.

Introduced in the wake of the 2008 financial crisis, the currency was a way of avoiding governments and central banks. However, its meteoric rise and popularity has meant that banks, brokers and mainstream investors want to get in on the action but with regulatory oversight.

“The launch of the futures will actually make the market healthier,” Cboe President Chris Concannon said in a statement. “It will create pricing equilibrium in the market. Clients who are holding bitcoin now have no way to hedge their risk. These products allow them to hedge, and to take opposing views. More importantly, it brings a wave of regulatory oversight.”

©BestExecution 2018

London Stock Exchange Group acquires MayStreet

London Stock Exchange Group (LSEG) has signed an agreement to acquire MayStreet, a US-based...

Gemspring acquires GoldenSource

Gemspring Capital, a middle-market private equity firm,  has acquired GoldenSource, a provider of enterprise...

Fenergo launches FinCrime risk solution

Fenergo, a  provider of digital solutions for Know Your Customer (KYC) and client lifecycle...

London Stock Exchange Group acquires MayStreet

London Stock Exchange Group (LSEG) has signed an agreement to acquire MayStreet, a US-based...

Gemspring acquires GoldenSource

Gemspring Capital, a middle-market private equity firm,  has acquired GoldenSource, a provider of enterprise...

Fenergo launches FinCrime risk solution

Fenergo, a  provider of digital solutions for Know Your Customer (KYC) and client lifecycle...