On October 31 the world’s largest options and futures exchange, CME Group, has announced it will be launching a bitcoin-based derivatives marketplace for future contracts during Q4 of 2017. The U.S. headquartered financial markets company says there is “increasing interest” for cryptocurrency options and futures products for mainstream investors.
The World’s Leading FX Marketplace Will Launch bitcoin-based derivatives In Q4 2017
Just recently news.Bitcoin.com reported on the company Ledger X swapping over $1M in bitcoin options during its first week. Now CME Group plans on creating a bitcoin-centric derivatives and futures exchange over the next two months. According to CME, the contracts will be “cash settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin.” Additionally, the firm’s bitcoin futures will follow the same guidelines as CME’s traditional marketplaces.
“Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract,” explains Terry Duffy, CME Group’s CEO, and Chairman.
As the world’s largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities.
CME’s Futures Aims to Reflect the Global Bitcoin-Dollar Trade Transparently
CME has been calculating and publishing the BRR reference rates since 2016 with help from the firm Crypto Facilities Ltd. Essentially BRR tracks the trade flow of a few significant bitcoin exchange’s spot prices based on the U.S. dollar. CME explains the reference rate follows “IOSCO Principles” used in traditional financial standards. The following trading platforms used to calculate the BRR include Kraken, GDAX, Bitstamp, and Itbit.
“The BRR has proven to reliably and transparently reflect global bitcoin-dollar trading and has become the price reference of choice for financial institutions, trading firms and data providers worldwide,” details Dr. Timo Schlaefer, CEO of Crypto Facilities.
Also, both companies say that they will continue to provide a superior form of “price transparency to the spot bitcoin market,” with its CME CF Bitcoin Real-Time Index (BRTI). This particular index combines global demand within a calculated order book which mirrors bitcoin’s USD spot price. “The BRTI is published in real time and is suitable for marking portfolios, executing intra-day bitcoin transactions and risk management,” CME notes.
Will Future’s Open the Doors for Bitcoin ETFs?
A lot of cryptocurrency proponents are excited for bitcoin options and futures markets, as they could help pave the way for specific bitcoin-based exchange-traded funds (ETF). Many ETF applicants have decided to wait for CME and Ledger X to get the ball rolling before applying again with the U.S. Securities and Exchange Commission (SEC). CME Group details that its bitcoin futures products will launch if “all relevant regulatory review periods,” are approved by U.S. officials.
What do you think about CME launching a bitcoin-based derivatives marketplace for future contracts? Let us know in the comments below.
Images via Shutterstock, AP Photo/M. Spencer Green, and CME Group.
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