Chicago Mercantile Exchange, CBOE Futures certify new contracts for bitcoin

The Chicago Mercantile Exchange (CME) and the CBOE Futures Exchange (CFE) certified new contracts for bitcoin futures products last week.

Further, the Cantor Exchange certified a new contract for bitcoin binary options.

“Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past,” Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo said. “As a result, we have had 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. In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin.”

Giancarlo noted that the relatively new underlying cash markets and exchanges for bitcoin are mostly unregulated markets as the CFTC has limited statutory authority.

“There are concerns about the price volatility and trading practices of participants in these markets,” Giancarlo said. “We expect that the futures exchanges, through information sharing agreements, will be monitoring the trading activity on the relevant cash platforms for potential impacts on the futures contracts’ price discovery process, including potential market manipulation and market dislocations due to flash rallies and crashes and trading outages. Nevertheless, investors should be aware of the potentially high level of volatility and risk in trading these contracts.”

After the contracts are launched, the commission will monitor and analyze the size and development of the market, positions, open interest, margin requirements, margin payments, and stress testing positions. In addition, staff will review designated contract markets, derivatives clearing organizations (DCOs), clearing firms and individual traders involved in trading and clearing bitcoin futures.