Bitcoin might finally have regulated futures trading within two months, following an announcement by CME Group earlier today.
“CME Group, the world’s leading and most diverse derivatives marketplace, today announced it intends to launch bitcoin futures in the fourth quarter of 2017, pending all relevant regulatory review periods,” the company said.
If green light is given, this would be the first regulated futures product for bitcoin trading, potentially increasing its use as a hedge by institutions, which have recently been showing considerable interest.
A hedge fund that has beaten the market for the past 15 years, for example, run by the “legendary investor Bill Miller,” according to CNBC, now has an incredible 30% of its assets in bitcoin.
As such, companies are now starting to offer them the necessary services, such as futures. Terry Duffy, CME Group Chairman and Chief Executive Officer, says:
“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.”
CME Group is the “world’s largest options and futures exchange,” with some $3 billion yearly revenue servicing US and UK markets.
They are to use their own CME CF Bitcoin Reference Rate (BRR) for cash-settling new contracts, with the rate serving as a “once-a-day reference rate of the U.S. dollar price of bitcoin.”
That’s designed in partnership with the London based Crypto Facilities. Its CEO, Timo Schlaefer, says:
“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.”
It remains to be seen whether American regulators, which in this case would be the somewhat crypto-friendly CFTC, will give the green light.
If they do, then bitcoin’s liquidity might considerably increase as the year closes, with the $100 billion market becoming somewhat more mature and potentially less volatile.