Two Chicago-based exchanges to begin trading bitcoin futures in December

Bitcoin futures to begin trading in the CME on December 18

PUBLISHED : Saturday, 02 December, 2017, 12:34am
UPDATED : Saturday, 02 December, 2017, 12:38am

Bitcoin futures will begin trading on the Chicago Mercantile Exchange (CME) on December 18, after the exchange group filed a self-certification to the US commodity regulator CFTC.

US regulators have called for cryptocurrency contracts to be self-certified, requiring exchanges to take full responsibility for compliance with commodity laws and demanding a keener eye on contract detail.

The Chicago Board Options Exchange (CBOE) also filed a certification with the CFTC on Friday for the launch of its own bitcoin futures. While no official start-date was confirmed, CBOE contracts, which will trade on its CFE futures exchange under the XBT ticker, were made available for participant testing on November 13.

CME contracts require initial margin of 35 per cent, though that may be ramped up for end users as futures commission merchants add an additional margin layer. Variation margin will also be charged to cover daily mark-to-market moves.

“Though we have worked through a lengthy, comprehensive process with the CFTC to get to this point, we recognise bitcoin is a new, uncharted market that will continue to evolve, requiring continued collaboration with the Commission and our clients going forward,” CME Group chairman Terry Duffy said in a statement.

Offering bitcoin futures was a response to user demand and a reflection of the belief that digital currencies will grow worldwide in the decades to come, said Chris Concannon, president of CBOE Global Markets Inc, one of three venues that announced it will soon start offering the products.

“We are big believers in the cryptocurrency markets,” Concannon said in an interview after the Friday announcement. “I actually believe that national currencies will begin issuing digital currencies. So this first step is a very big step into what I see as a growing market.”

The CBOE started talking to the Commodity Futures Trading Commission several months ago about offering the product in response to client demand, Concannon said. It was a natural step in the development of a market that is already growing rapidly, and the ability to bet on declines as well as gains may help smooth some of the volatility, he said.

“Over the next 10 years we believe that the cryptocurrency market will explode in terms of the assets that they touch, the currencies that they involve,” Concannon said.

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CME contracts will reference the exchange’s CF bitcoin Reference Rate (BRR) – a once-a-day rate of bitcoin prices from four exchanges. CBOE contracts will reference bitcoin prices from Cameron and Tyler Winklevoss’s Gemini exchange.

CME contracts will include circuit breakers set at 7 per cent and 13 per cent up or down, with limits that prevent the contract trading more than 20 per cent above or below the previous day’s BRR close.

The filings come as Nasdaq joined the race to corner the bitcoin derivatives market. The exchange is joining forces with investment firm VanEck, to offer contracts referencing a broad index of bitcoin prices, taken from across 50 exchanges.

Bitcoin hit an all-time high of US$11,395 on Wednesday, representing a 10-fold increase on the year. The cryptocurrency dropped below US$9,000 the following day, but has since rebounded to trade as high as US$10,740 in early trading on Friday.