CME Group to Launch Bitcoin Futures

Edward Kim  |

CME Group (NYSE: CME) announced yesterday that it intends to launch bitcoin futures in the fourth quarter of 2017, pending all relevant regulatory review periods. The new contract will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) calculated and published by CME Group and Crypto Facilities, which serves as a once-a-day reference rate of the US$ price of bitcoin.

Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract. 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.

- Terry Duffy, CME Group Chairman and CEO, as quoted in yesterday's press release

Mr. Duffy also told CNBC that CME Group has been "working with the regulator. They understand our application. And they understand our model very, very well." The introduction of bitcoin futures could also pave the way for an eventual bitcoin ETF. According to CNBC, ProShares and VanEck, two of the largest ETF players, filed in the last few months with the SEC to introduce bitcoin ETFs. "But VanEck withdrew its application in late September after the SEC said it wouldn't review a filing for a product whose underlying instruments don't exist."

The price of bitcoin surged up over 3% yesterday on the news, shrugging off Jamie Dimon, Larry Fink and the Chinese government as it continues its unprecedented record run. It's up 14% this week alone, nearly 50% over the past month and over 800% over the past year. At noon ET today, it was trading at $6,560 on Bitstamp.


Source: Coinbase

Since November 2016, CME Group and Crypto Facilities have calculated and published the BRR, which aggregates the trade flow of major bitcoin spot exchanges during a calculation window into the US$ price of one bitcoin as of 4:00 pm London time. The BRR is designed around the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks. Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR.

Dr.Timo Schlaefer, CEO of Crypto Facilities, said, "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 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, is published in real time and is suitable for marking portfolios, executing intraday 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.

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