December 18: Bitcoin will have quoted futures of CME Group

On Friday, the president and CEO of CME Group, Terry Duffy, made the historic announcement, revealing that the exchange has received approval from the US Commodity Futures Trading Commission (CFTC). UU to start trading bitcoin futures in just over two weeks:

“We are delighted to bring Bitcoin futures to the 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,” Duffy said.

However, in statements, CFTC Commissioner J. Christopher Giancarlo quickly warned against the idea that the products would be regulated under his full supervision, signaling his “limited statutory capacity” to supervise the underlying cash markets for commercialization. of bitcoins.

“Market participants should keep in mind that underlying cash markets are relatively nascent and bitcoin exchanges remain largely unregulated markets over which the CFTC has limited legal authority.” There are concerns about price volatility and the business practices of the participants in these markets.”

Futures will be settled in cash, which means that no real bitcoin will change hands when the contracts expire. The market data of bitcoin exchanges Bitstamp, GDAX, itBit and Kraken will be used to calculate the CCO bitcoin reference rate (BBR) once a day.

However, despite the cash settlement process, some institutional investors have expressed concern about the incorporation of bitcoin derivatives into CME. Duffy tried to mitigate those concerns by emphasizing that contracts will be subject to a large number of risk management tools to prevent the volatility of bitcoins from having unwanted side effects in other markets.

“At launch, our new Bitcoin futures contract will be subject to a variety of risk management tools, including an initial margin of 35 percent, intraday and position price limits, and a number of other risk and risk controls. credit that CME Group offers in all its services.” products, said Duffy.

He continued: “Although we have worked in a long and comprehensive process with the CFTC to reach this point, we recognize that Bitcoin is a new, unexplored market that will continue to evolve, and that requires continuous collaboration with the Commission and our customers in the future. At launch, our new Bitcoin futures contract will be subject to a variety of risk management tools, including an initial margin of 35 percent, intraday and position price limits, and a number of other risks and risk controls and credit that CME Group offers in all its services.”

The new contract will be listed and will be subject to the CME rules. It will be available for trading on the CME Globex e-commerce platform, and for the presentation of compensation through CME ClearPort, effective from Sunday, December 17, 2017 for a trading date of December 18.

Bitcoin futures of CME Group will be settled in cash, based on the CME CF Bitcoin reference rate (BRR), which serves as a once-a-day reference rate of the bitcoin price in US dollars. Since November 2016, CME Group and Crypto Facilities Ltd. calculated and published the BRR, which adds the commercial flow of the main bitcoin spot exchanges during a calculation window to the price in US dollars of a bitcoin at 4:00 p.m. M., London time.

The BRR is designed around the IOSCO Principles for Financial Parameters. Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute to the price data to calculate the BRR.