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CME’s Bitcoin Futures to Launch December 18

Last Updated March 4, 2021 5:02 PM
Josiah Wilmoth
Last Updated March 4, 2021 5:02 PM

Chicago derivatives exchange operator CME Group has announced that it has self-certified the initial listing of its bitcoin futures contract to launch on December 18.

CME Chairman and CEO Terry Duffy made the historic announcement on Friday, revealing that the exchange has received approval from the U.S. Commodity Futures Trading Commission (CFTC) to begin trading bitcoin futures in just a little over two weeks:

“We are pleased to bring Bitcoin futures to market after working closely with the CFTC and market participants to design a regulated offering that will provide investors with transparency, price discovery, and risk transfer capabilities,” said Duffy.  

The futures will be cash-settled, meaning that no actual bitcoins change hands at the expiration of the contracts. Market data from bitcoin exchanges Bitstamp, GDAX, itBit, and Kraken will be used to calculate CME’s once-a-day Bitcoin Reference Rate (BBR).

However, despite the cash-settlement process, some institutional investors have expressed concern at the addition of bitcoin-derived products to CME. Duffy sought to assuage those concerns by stressing that the contracts will be subject to a myriad of risk management tools to prevent bitcoin’s volatility from having unwanted ripple effects into other markets.

“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,” said Duffy. “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.”

CME is not the only U.S. exchange planning to add bitcoin futures to their product offerings. CBOE has already expressed its desire to list these products, and — just this week — The Wall Street Journal reported Nasdaq Inc. hopes to list bitcoin futures on one of its U.S. exchanges during the first half of 2018.

The launch of the first bitcoin futures contracts on a regulated U.S. exchange is expected to be a watershed moment for the cryptocurrency industry. Not only will it provide professional traders with the ability to short bitcoin for the first time, but it will also open the door to the creation of a Bitcoin ETF and likely entice Wall Street firms to step off the sidelines and engage directly with bitcoin and other digital assets. Ultimately, the first bitcoin futures trade could be remembered as the event that secured bitcoin’s entry into the mainstream financial services sector.

Featured image from Shutterstock.