With a Green Light From the CFTC, Three Trading Houses Get Set for Bitcoin Futures

CME Group Inc. said on Friday it will launch a futures contract for Bitcoin on Dec. 18, a move some expect will lend considerable stability to the market for the 8-year-old digital currency. Also on Friday, Chicago-based CME’s crosstown rival, Cboe Global Markets Inc., said it will announce “shortly” an “impending” launch date for Bitcoin futures trading on its platform.

The announcements follow a Friday release by the Commodity Futures Trading Commission that CME Group, Cboe, and the Cantor Exchange, a unit of New York City-based investment banker Cantor Fitzgerald & Co., will proceed with Bitcoin derivatives trading following CFTC review. Futures contracts allow traders to buy or sell a commodity at a specified price on a specified date.

Recognizing Bitcoin’s largely unregulated market and price volatility, the regulator said it has required guardrails for investors. “Bitcoin, a virtual currency, is a commodity unlike any the commission has dealt with in the past,” J. Christopher Giancarlo, chairman of the CFTC, said in a statement. “As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, [Cboe], and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets.” The commission said it will expect the platforms to monitor trading, and the CFTC will over time track risk indicators, including the size of the market and margin requirements.

The commission’s approvals follow what it calls “rigorous discussions” that lasted four months with Cboe and six weeks with CME. It said it also held “numerous calls” with both platforms as well as Cantor.

Futures trading could help smooth out what has been a volatile market. Only Wednesday, Bitcoin’s price had risen to nearly $11,500 before sliding by more than $2,000 over the next 24 hours. By Friday morning, it had partially rebounded to $10,600. Muted volatility might help make Bitcoin more attractive as a payment instrument, some observers say, in contrast to its role as an investment vehicle.

Still, Bitcoin’s potential as medium of exchange has been hindered by other problems, as well, among them traffic congestion on the Bitcoin blockchain that has slowed transaction times and driven up fees for users.