CME Group Set To Launch Bitcoin Futures

The CME Group, the world’s largest derivatives exchange, has confirmed the completion of their self-certification with the Commodity Futures Trading Commission, which paves the way for the listing of Bitcoin futures contracts on December 18th.

The CME is poised to add Bitcoin to its diverse range of futures and options that also include agricultural products, energy, foreign exchange, and metals. The Bitcoin futures contracts are scheduled to launch on Monday, December 18th, and confirms the CME’s intention to provide a Bitcoin futures contract in Q4 2017.

The new contract will be available for trading on the CME Globex electronic trading platform. The Bitcoin futures will be cash-settled and based on the CME CF Bitcoin Reference Rate (BRR), which acts as a once-a-day reference rate of the U.S. dollar price of Bitcoin. The BRR aggregates the trade flow of major Bitcoin spot exchanges and utilizes the trading statistics from exchanges such as Bitstamp, GDAX, and Kraken in order to calculate their pricing data.

The Bitcoin futures trading contracts are ready to be launched following an extended period of communication between the CME and the Commodity Futures Trading Commission (CFTC). The CME completed a self-certification process in order to be compliant with the stipulations laid out by the Commission. CFTC Chairman J. Christopher Giancarlo has stressed that participants need to remain aware that Bitcoin’s cash markets and exchanges are largely unregulated environments and that the CFTC has limited statutory authority over them.

As a result, concerns remain regarding price volatility and trading practices. The CFTC expects the futures exchange to monitor trading activity on cash platforms and look out for potential market manipulation or any market dislocations that may occur due to flash rallies or crashes, as well as trading outages.

Via a press statement, Giancarlo elaborated on his views, stating: “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.”

Terry Duffy, the CME Group Chairman and Chief Executive Officer announced: “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.” He went on to add: “We recognize Bitcoin is a new, uncharted market that will continue to evolve, requiring continued collaboration with the Commission and our clients going forward.”

The CME Bitcoin futures market listing follows a similar launch by rival exchange, the Chicago Board Options Exchange (Cboe). The Cboe also underwent a regulatory review and filed a product certification with the Commodity Futures Trading Commission in order to offer Bitcoin futures trading.

After opening on Sunday evening, the first session on the Global Market’s exchange experienced a surge in Bitcoin futures price by as much as 26%. Bitcoin contracts set to expire in January opened at a price slightly above $15,000 and raced to a high of approximately $18,700. In their first full day of trading the new futures, contract settled at a price of $18,545; which represented a price increase of slightly below 20%.

A flurry of trading activity triggered two temporary trading halts while a surge in traffic caused an early outage of the Cboe website. The launch of the CME Bitcoin futures market remains a highly anticipated event that should have a significant effect on the price of Bitcoin.

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