The Commodity Futures Trading Commission (CFTC) has cleared the way for three exchanges to offer Bitcoin futures and options instruments. Included on that list is the Chicago Mercantile Exchange (CME), the world’s largest derivatives exchange.
In a statement CFTC chair J. Christopher Giancarlo acknowledged the unique challenges of this new financial instrument.
Describing it as “a commodity unlike any the Commission has dealt with in the past”, he revealed that there had been “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.”
The CME will offer cash-settled contracts which allow for investor exposure to Bitcoin without having to own any.
Towards Institutional Approval
The move is widely seen as part of the maturing of cryptocurrencies and their movement into the financial mainstream. CEO chair Terry Duffy said that they had designed, “a regulated offering that will provide investors with transparency, price discovery and risk transfer capabilities.”
Volatility in Bitcoin prices has been putting off many institutional investors. Goldman Sachs boss Lloyd Blankfein stated that his company would only consider a Bitcoin strategy when the digital currency “calmed down and behaved itself like a regular asset.”
The new CME Bitcoin derivative contracts could be a step towards this, with Duffy promising that various risk management controls will be in place, including 35% margins with position and intraday price limits.
Trading will start on all exchanges on December 18 this year. The longer term impact of the move appears likely to result in greater engagement with crypto-currencies and crypto-tokens more generally.