U.S. regulator to allow CME, CBOE to list bitcoin futures
(Adds comment from CBOE CEO, background on bitcoin, graphic on
By Michelle Price and John McCrank
WASHINGTON, Dec 1 (Reuters) - The main U.S. derivatives
regulator said on Friday it would allow CME Group Inc
and CBOE Global Markets Inc to list bitcoin futures
contracts, opening the door to added regulation and more
mainstream adoption of the cryptocurrency.
The announcement by the Commodity Futures Trading Commission
paves the way for CME and CBOE to become the first traditional
U.S. regulated exchanges where bitcoin-related financial
contracts can trade.
CME, the world's largest derivatives exchange, said it would
list its bitcoin futures contract on Dec. 18. CBOE said it
would set a launch date in the near future. Both contracts will
be priced against and settled in the cash bitcoin
The bitcoin underlying the futures contracts will still be
traded on lightly regulated over-the-counter markets. Still,
putting futures contracts on highly scrutinized U.S. exchanges
could convince other regulators to allow more
cryptocurrency-derived products such as exchange-traded funds.
So far, the U.S. Securities and Exchange Commission has not
allowed bitcoin-based ETFs on the CBOE or elsewhere, partly
because of concerns around the unregulated aspect of bitcoin.
CBOE will return to the SEC with its ETF application as
liquidity builds in futures contracts and the exchanges
demonstrate how their oversight of the underlying market works,
the exchange operator's Chief Executive Officer Ed Tilly said in
"I would anticipate then you’ll see a great many
applications for notes and funds that are tracking or holding
crypto" currencies, he said.
CFTC Chairman Christopher Giancarlo warned investors that
the nascent underlying bitcoin cash markets remained largely
unregulated and mostly beyond the commission's purview.
The futures exchanges must coordinate to help spot market
manipulation, flash rallies, trading outages and other problems
on the unregulated exchanges where bitcoin is traded, he said in
"Nevertheless," Giancarlo added, "investors should be aware
of the potentially high level of volatility and risk in trading
CME and CBOE have agreed to enter into information-sharing
agreements and send the CFTC data on the settlement process so
the regulator can conduct its own surveillance.
Bitcoin's price has soared tenfold this year, but many
market participants warned of a bubble this week as it topped
$11,000 for the first time.
To guard against volatility, CME and CBOE will enact
stricter-than-usual risk-management safeguards, including
initial margin requirements of 35 percent to 40 percent.
The virtual currency, which before the news had been trading
at around $10,150 on the Luxembourg-based Bitstamp exchange
, jumped to as high as $10,513 in the minutes that
followed, up more than 5 percent on the day. It was last up 6.6
percent at $10,600.
"This is a tacit approval for the industry as a whole;
digital assets are now mainstream," said Charles Hayter, CEO of
cryptocurrency platform CryptoCompare.
Under CFTC regulations, designated contract exchanges such
as CME and CBOE's CFE do not need the commission's prior
approval to list products for trading. They need only file a
written self-certification with the regulator.
Under self-certification, a quirk of the futures market, an
exchange confirms that the product complies with the Commodity
Exchange Act and CFTC regulations, including that the contract
is not susceptible to manipulation.
CME has been vying with CBOE to introduce the first
bitcoin-related financial product.
Nasdaq Inc also plans to list a futures contract
based on bitcoin in 2018, Reuters reported this
(Reporting by Michelle Price and John McCrank; Additional
reporting by Jemima Kelly and Gertrude Chavez-Dreyfuss; Editing
by Leslie Adler, Lisa Von Ahn and David Gregorio)
First Published: 2017-12-01 04:51:20
Updated 2017-12-01 19:39:06
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