The U.S. Commodities Futures Trading Commission (CFTC) Friday morning approved proposals by CME Group Inc. (NASDAQ: CME) to list bitcoin futures and provide a regulated trading platform for the cryptocurrency futures market. The Chicago Board of Exchange (CBOE) and the Cantor Exchange also self-certified new contracts for bitcoin futures and bitcoin binary options, respectively.
CME expects to launch its bitcoin futures contract on December 18. The new contract will be listed on and subject to the rules of CME and will be available for trading on the CME Globex electronic trading platform, and for submission for clearing via CME ClearPort, effective on Sunday, December 17, 2017 for a trade date of December 18.
The futures contracts will be cash-settled based on the CME CF Bitcoin Reference Rate (BRR), which will be calculated once a day at the U.S. dollar price of bitcoin.
CFTC Chairman J. Christopher Giancarlo said:
Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past. As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets. In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin.
Giancarlo stressed the high level of risk in trading bitcoin:
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. We expect that the futures exchanges, through information sharing agreements, will be monitoring the trading activity on the relevant cash platforms for potential impacts on the futures contracts’ price discovery process, including potential market manipulation and market dislocations due to flash rallies and crashes and trading outages. Nevertheless, investors should be aware of the potentially high level of volatility and risk in trading these contracts.
CME Group CEO Terry Duffy said:
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. Though we have worked through a lengthy, comprehensive process with the CFTC to get to this point, we recognize bitcoin is a new, uncharted market that will continue to evolve, requiring continued collaboration with the Commission and our clients going forward. At launch, our new Bitcoin futures contract will be subject to a variety of risk management tools, including an initial margin of 35 percent, position and intraday price limits, and a number of other risk and credit controls that CME Group offers on all of its products.
Bitcoin traded at $10,465.58, up 5.54%, Friday morning, according to Coindesk, up more than $2,000 over the past week.