CME Group, the $51 billion US-based financial institution and the world’s largest options exchange, is set to finalize the integration of its bitcoin futures exchange by December 17, and open bitcoin futures for trading by December 18.
CME Receives Approval From CFTC
In an official announcement, Terry Duffy, CME Group Chairman and CEO, revealed the company has received the approval from the US Commodities and Futures Trading Commission (CFTC) to list bitcoin futures and provide infrastructure around bitcoin options, derivatives, and futures contracts.
In the first few weeks of operation, traders on CME’s bitcoin futures exchange will be limited to initiating trades with an initial margin of 35 percent. Various risk management tools have been implemented onto CME’s bitcoin futures trading platform, given that it is a strictly regulated exchange overseen by the CFTC.
“Though we have worked through a lengthy, comprehensive process with the CFTC to get to this point, we recognize bitcoin is a new, uncharted market that will continue to evolve, requiring continued collaboration with the Commission and our clients going forward. At launch, our new Bitcoin futures contract will be subject to a variety of risk management tools, including an initial margin of 35 percent, position and intraday price limits, and a number of other risk and credit controls that CME Group offers on all of its products.”
The CME bitcoin futures platform rely on the CME CF Bitcoin Reference Rate (BRR) to obtain the global average price of bitcoin based on Bitstamp, GDAX, itBit and Kraken. These four cryptocurrency exchanges are well-regulated within the US and Europe, and are fully compliant with the regulatory frameworks established by respective governments within the two regions.
CME’s Impact on Bitcoin’s Mid-Term Growth
On November 14, CCN.com reported that the UK-based $100 billion hedge fund Man Group has announced its official plans to invest in bitcoin and commit to the bitcoin market upon the completion of CME’s bitcoin futures exchange launch.
Man Group CEO Luke Ellis told Reuters:
“Conceptually digital currencies are an interesting thing. It’s not part of our investment universe today – it could be. If there is a CME future on bitcoin, it would be.”
Large-scale hedge funds with a market valuation of over $10 billion typically have a minimum investment threshold in the range of $300 to $500 million. Hence, if large-scale hedge funds like Man Group invest in the bitcoin market, tens of billions of dollars in institutional money will flow into bitcoin, increasing liquidity of the digital currency.
Ellis and executives of other major hedge funds such as Fidelity Investments, a US-based investment firm with $3.23 trillion assets under management, have expressed optimism in regards to the decentralized structure of bitcoin and its transparent nature which enables it to operate as a robust store of value and a fair monetary system.
“There is a big difference between a digital currency and a traditional currency…Traditional ones are supported by governments who have armies and tax men that can make people follow their rules, and digital ones don‘t. But that doesn’t invalidate digital currencies at all,” said Ellis.
As large sums of institutional money flow into the bitcoin market and companies within the traditional finance sector continues to adopt bitcoin, in the mid to long-term, the mainstream adoption of bitcoin will inevitably surge at an exponential rate.
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