Bitcoin Futures Contracts

CME Group to Launch Options on Bitcoin Futures Contracts

Bitcoin Futures ContractsCME Group has announced it will launch options on its Bitcoin futures contracts in Q1 2020, pending regulatory review, thus providing clients with additional tools for precision hedging and trading.

CME Bitcoin futures were first launched in December 2017, with already 20 successful futures expiration settlements and more than 3,300 individual accounts have traded the product since inception.

This year, nearly 7,000 CME Bitcoin futures contracts (equivalent to about 35,000 bitcoin) have traded on average each day. The derivatives, options and futures specialist has reported growing
institutional interest, with the number of large open interest holders reaching a record 56 in July.

Tim McCourt, Global Head of Equity Index and Alternative Investment Products at CME Group, commented: “Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk. These new products are designed to help institutions and professional traders to manage spot market bitcoin exposure, as well as hedge Bitcoin futures positions in a regulated exchange environment.”

Earlier this month, CME filed with the U.S. Commodity Futures Trading Commission (CFTC) to increase in the so-called spot-month position limit for its bitcoin futures contracts. If approved, the limit would jump from 1,000 contracts per spot month to 2,000 for any single investor. Currently, each contract is for five bitcoin, so the change means a trader’s maximum exposure would double from 5,000 bitcoin (worth about $50 million at current prices) to 2,000 contracts (10,000 bitcoin, or $100 million).

CME Group listed its first Bitcoin futures contract on December 18, 2017. Cash-settled, based on the CME CF Bitcoin Reference Rate (BRR), and calculated an published since November 2016, with assistance from Crypto Facilities, BRR aggregates the trade flow of major bitcoin spot
exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time. The BRR is designed around the IOSCO Principles for Financial Benchmarks.

During the 2017 launch, CME Group’s Terry Duffy stated, “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.”