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Coming Soon: Bitcoin Futures Contracts on the CME

November 3, 2017

 

While it looks like we still have to wait for cannabis futures, derivatives exchange operator CME Group Inc. (NASDAQ:CME) just announced via press release that it intends to launch bitcoin futures contracts in the fourth quarter of 2017, pending all relevant regulatory review periods. These new contracts should lead to a more liquid and stable market for bitcoin traders and market participants. 

 

"Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract," said Terrence A. Duffy, CME Group Chairman and CEO. "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."

 

The new contract 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.  Bitcoin futures will be listed on and subject to the rules of CME.

 

Since November 2016, CME Group and Crypto Facilities Ltd. have calculated and published the BRR, which aggregates the trade flow of major bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time. The BRR is designed around the IOSCO Principles for Financial Benchmarks. Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR.

 

"We are excited to work with CME Group on this product and see the BRR used as the settlement mechanism of this important product," said Dr.Timo Schlaefer, CEO of Crypto Facilities. "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."

 

CME Group and Crypto Facilities Ltd. also publish the CME CF Bitcoin Real Time Index (BRTI) to provide price transparency to the spot bitcoin market. The BRTI combines global demand to buy and sell bitcoin into a consolidated order book and reflects the fair, instantaneous U.S. dollar price of bitcoin in a spot price. The BRTI is published in real time and is suitable for marking portfolios, executing intra-day bitcoin transactions and risk management.

 

Cryptocurrency market capitalization has grown in recent years to $172 billion, with bitcoin representing more than 54 percent of that total, or $94 billion. The bitcoin spot market has also grown to trade roughly $1.5 billion in notional value each day.

 

In the meantime, keep up with cannabis industry updates from The Daily Marijuana Observer by subscribing to one or more of our free email newsletters and by following us on Facebook, Twitter and Instagram.

 

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