CME, CBOE to Begin Bitcoin Futures Trading

U.S. financial firms CME Group, CBOE and Cantor Fitzgerald revealed today they will list financial products offering exposure to cryptocurrencies starting December 18.

First unveiled in an announcement by the U.S. Commodity Futures Trading Commission (CFTC), the regulator said all three companies will pursue a self-certified initial listing, after working with the agency to set a standard for the offerings.

The reveal comes just weeks after CME indicated via its website that it would launch the product on December 11, before retracting the remarks, and months after CBOE revealed it, too, would seek to launch a futures product.

Both CME and CBOE will offer cash-settled contracts that will find investors buying exposure to different reference rates that will not require custody of the asset. CME will use a custom reference rate created with partner Crypto Facilities, while CBOE intends to use data from the New York-based cryptocurrency exchange Gemini.

Cantor Exchange, a subsidiary of Cantor Fitzgerald, will offer bitcoin binary options beginning on the above date.

However, in remarks, CFTC Commissioner J. Christopher Giancarlo was quick to caution against the idea that the products would be regulated under its full oversight, noting its "limited statutory ability" to oversee the underlying cash markets for bitcoin trading.

He said:

"Market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority. There are concerns about the price volatility and trading practices of participants in these markets."

Elsewhere, the CFTC sought to frame itself as a participant in the launch, indicating it had held discussions with CME, Cantor and CBOE for months prior to today's news.

The regulator also indicated that it would maintain a close watch on the nascent market for bitcoin-tied financial products. The CFTC said that it intends to "assess whether further changes are required to the contract design and settlement processes and work with the [designated contract markets] to effect any changes" over time.

Ready to trade

Warnings aside, those listing the products expressed optimism about their release.

In remarks, Terry Duffy, CME Group chairman and CEO, said he believes the Chicago-based exchange, as well as its peers, have put in place the necessary safeguards for the listing.

"We are pleased to bring bitcoin futures to market after working closely with the CFTC and market participants to design a regulated offering that will provide investors with transparency, price discovery and risk transfer capabilities."

At launch, Duffy explained the bitcoin futures product will be subject to risk management tools, including a margin of 35 percent, position and intraday price limits. The new contract will be traded on the CME Globex platform.

For more on CME's views on its forthcoming product, view our interview with managing director of equity products, Tim McCourt, below.

Live from Invest with Tim McCourt https://t.co/tdG8dJxiOf







— CoinDesk (@coindesk) November 28, 2017

Disclosure: CME Group is an investor in Digital Currency Group, CoinDesk's parent company.

CME image via Shutterstock