CME Group To Launch Bitcoin Futures
CME Group (NASDAQ:CME) has announced that it intends to launch bitcoin futures in the fourth quarter of 2017. Terry Duffy, CME Group Chairman and CEO, said, “Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract.” The goal is to provide a “regulated trading venue” for the cryptocurrency market. The launch is conditional on all relevant and necessary regulatory review periods.
Duffy said that this new vehicle “will provide investors with transparency, price discovery and risk transfer capabilities.” The CME CF Bitcoin Reference Rate (BRR) will serve as a once-a-day reference rate of the U.S. dollar price of bitcoin, giving the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time. The BRR is designed around the International Organization of Securities Commissions’ Principles for Financial Benchmarks.
CME and Crypto Facilities Ltd., a crypto futures trading platform regulated by the UK, have calculated and published the BRR since November 2016. Dr. Timo Schlaefer, CEO of Crypto Facilities, said of the project, “We are excited to work with CME Group on this product and see the BRR used as the settlement mechanism of this important product.”
The move is the first major indication of acceptance of bitcoin by Wall Street. There are now more than 100 hedge funds investing in bitcoin and similar digital currencies have emerged during the last few years. Cryptocurrency market capitalization has grown to $172 billion in recent years. Bitcoin represents more than 54 percent of that amount (roughly $94 billion).
The news sent bitcoin surging 4.8 percent in afternoon trading to an all-time high above $6,300. The digital currency has surged 569 percent this year. The currency has been derided by some as a fad and a bubble. On Sept. 12, JPMorgan Chase CEO Jamie Dimon called bitcoin a “fraud.” He walked back his comments a month later.
CME Group is one of the world’s leading and most diverse derivatives exchange marketplaces and is the world’s largest regulated FX marketplace. CME offers a range of products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals.
The CME and Crypto Facilities also publish the CME CF Bitcoin Real Time Index (BRTI). The BRTI is described as “the fair, instantaneous U.S. dollar price” of bitcoin in a spot price and is published in real time. It is said to be suitable for marking portfolios, executing intra-day bitcoin transactions, and risk management.
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