CME Unveils Bitcoin Futures Circuit Breakers

Tyler Durden's picture

Having taken a gamble on bitcoin futures, which are set to begin trading by the end of the year, the CME is now seeking to avoid the consequences of what has emerged as both the cryptocurrency's best and worst selling point: its unprecedented volatility. To do that, the Chicago-based exchange will do what it does to virtually every other asset class traded under its roof, and impose limits on how much prices of bitcoin futures can fluctuate within a day.

While the CME already uses daily vol limits on most other markets, including crude, gold and market futures, to temporarily halt trading when price swings get out of control, the CME has never before dealt with something like bitcoin, which in addition to being the world's best performing asset classes in recent years, is also its most volatile. And, as the WSJ adds, it is also unclear how much impact CME’s limits will have on bitcoin, since its futures market has yet to emerge and most trading in the digital currency is on exchanges outside of CME’s control.

In any case, based on the CME's preliminary term sheet, bitcoin trading limits would kick in when the price of its bitcoin futures move 7%, 13% or 20% up or down from the previous day’s closing price. The first two thresholds, for 7% and 13% moves, are “soft” limits, which would trigger a two-minute pause in trading of bitcoin futures. The 20% limit would be a “hard” stop on how far CME’s bitcoin futures could swing on any day.

By comparison, the CME has similar staggered volatility control on its popular E-mini S&P 500 futures contract, which also has three successive price-fluctuation limits at 7%, 13% and 20% during regular trading hours. A nighttime limit of 5% was hit in the S&P 500 futures on Nov. 8, 2016, when news of Donald Trump’s upset win in the U.S. presidential election triggered wild volatility in stock-market futures, only for the S&P to surge 21% in the 12 months since.

Of course, bitcoin will be a far "wilder" and more volatile instrument than the S&P 500 (one hopes). According to Coindesk calculations, so far in 2017 there have been two days in which bitcoin’s price swung more than 20% in a single day. There were 11 days in which it moved at least 13%, and 69 in which it moved at least 7%.

The full bitcoin contract specsheet is below.

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RagaMuffin's picture

Arbitrage? 3....2..

Juggernaut x2's picture

"Circuit Breakers" on anything other than an electrical circuit is BS- true price discovery only occurs without them

nope-1004's picture

Of course, everything else the CME touches is manipulated (even physical goods like oil, wheat, PM's, coffee....) because that's how inflation is controlled in a hyper-printing environment, but bigcoin?  No.... never...... cuz blockchain is open and free.... you ignorant ZH peanutz....

 

I'd be a sellin' on this news.

 

AtATrESICI's picture

Fuck these assholes they want fake btc pricing.

marysimmons's picture

Yeah, listened to a lot of people who claimed to have professional experience in the futures market and most see it as a positive for BTC, but some are very skeptical and even negative.  It could bring a lot of institutional money into BTC and the crypto space, but if the futures market becomes enormous and the tail starts wagging the dog, then the price could be maniputaled. Uncharted territory dealing with a digital commodity/currency.  Maybe CME is better than COMEX

Bay of Pigs's picture

Not could manipulate, they will.

And no, they're not better than the COMEX.

tmosley's picture

>impose limits on how much prices of bitcoin futures can fluctuate within a day.

The king will allow the tide to come in, but only so much.

Woe to anyone who gets stuck in such a position.

Heavy McNuggets's picture

Isn't COMEX basically owned by CME?

0valueleft's picture

Enormity in 3  2.....1  Wag!

AtATrESICI's picture

Chicago the spiritual home of organized crime in the U.S.???

TPTB will gain the upper hand by hook or by crook.

Fuck it...

johngaltfla's picture

I haven't seen futures like these since LEH.

marysimmons's picture

It's some consolation to me that Andreas Antonopolous is a member of the oversight committee and Kraken (Jesse Powell, CEO), will be involved with the reference rate.  If the price becomes obviously manipulated, BTC could lose its status and another currency (BitcoinCash) or other fork of BTC could replace it.

Bumpo's picture

More like BitcoinCash will "try" to be the "real" bitcoin. If so, it will be a separate market, and not the store of value actual Bitcoin, but the mine as many as you want as fast as you want Bitcoin

Winston Churchill's picture

Is my QuickBooks a sov ?

You guys spout the right words with no understanding of what they mean.

I'll make it simple.

What part of: TPTB own the complete computer infrastructure that your product has to rely upon to

work,don't you understand ?

Everything, from the machine code running on your processor on up, with backdoors at every level.

There is no security or privacy,full stop.They don't need your encryption key,they already have it.

Deal with it and stop peddling snake oil.

 

 

AtATrESICI's picture

Once cross-chain atomic swaps are ubiquitous with all cryptos folks will not have to fool with centralized exchanges. F the controllers .

https://bitcointechtalk.com/atomic-swaps-d6ca26b680fe

https://news.bitcoin.com/altcoin-exchange-performs-first-atomic-swap-bet...

ZorroHedge's picture

They will. That's how the system works. Only the things they want to go up, will go up. Corrupt to the bone. Hive Blockchain Technologies is also surging. It is a Bitcoin mining company. However, the company is heavily shorted to avoid it to go up too much. They don't want people to sell of Facebook and Google shares for HIVE blockchain technologies of course. The stock market is a disgrace. Shorting should be forbidden. It only gives these manipulators the power to keep an asset down.

magnetosphere's picture

couple this bullshit paper trading, with the bilderberg group's total cockblock of any native capacity increase beyond 1 mb blocks, destroying btc's utility, and what you have here is the next reverse asset of a fractional reserve banking ponzi scheme. do any of you guys still support segshit??

Code Duello's picture

We sell on the day that futures begin trading; liquidate your btc holdings as that day approaches.  Sell short the nearby future on the opening day - early prices will probably be run up so use the strength to pitch a contract or two at the naive buyers.

Bumpo's picture

CME is NOT trading Bitcoin. Bitcoin has its own exchanges, and they work from the Blockchain. Bitcoin is the Honeybadger and gives no fucks what happens outside of the Blockchain. If the CME wants to track Bitcoin, fine but either settle at the end of the day, or be ready for wild fluctuations. Futures don't deal with actual Bitcoin.

AtATrESICI's picture

Next the crypto community needs to tokenize all commodities one unit to one token. Fuck the fraudsters.

Code Duello's picture

Just as futures did not deal with tomato paste or diamonds. 

overbet's picture

Fun Fact:

Circuit breakers were originally designed to give the ppt time to minimize their tranny midget porn and put their dicks away. 

Hal n back's picture

there goes the neighborhood.  (is that PC to say)

lasvegaspersona's picture

We can short Bitcoin?

Finally...Like gold, Bitcoin is likely to find its price 'managed'.

Heavy McNuggets's picture

Where were the "circuit breakers" when silver puked in 2011?

Ink Pusher's picture
Bitcoin Money Laundering Lands Six in Court

https://www.deepdotweb.com/2017/11/07/bitcoin-money-laundering-lands-six...

Juggernaut x2's picture

If you can't launder money with Bitcoin what is the point of it?

Ink Pusher's picture

To undermine the current fiat system and enslave mankind via the use of digital credit under a one world corpocracy.

 

BANKERS-WE ARE COMING FOR YOU's picture

If you don't hold your private keys.......you don't own it.

buzzsaw99's picture

this is a joke, right?

Late onset ADHD's picture

no, not a joke... and that's the joke...

Bigly's picture

The more outside entities try to enforce rules or guidelines...

Well, you fill in the rest.

Late onset ADHD's picture

valuations of the sugar plum unicorn fairies...

0valueleft's picture

This is insane, I know you get it. Must be for the women and children!

Late onset ADHD's picture

i'm just the piano player...

Ink Pusher's picture

I was joking about this about 6 months ago, I can't believe they actually got it approved...

The CME HOT AIR ETFs  are now a reality.

"Everything is possible and Nothing is REAL."

Ink Pusher's picture

SEC warns celebrity ICO endorsements may be “potentially unlawful”

https://www.deepdotweb.com/2017/11/05/bitcoin-news-roundup-5-11-17/

HRClinton's picture

The key word is "potentially".

If you have Tribal Membership and pay Club Dues, you are exempt.

e_goldstein's picture

and you thought taking delivery of gold was hard...

Late onset ADHD's picture

I spit my coffee on this article...

Rickety Rekt's picture

But EMP!!!!

The horror!

Like mentioned above. Big arb opp on big swings. 

Late onset ADHD's picture

I miss 'true' price discovery... a lot...

it's been relegated to "Santa" status...

nothing to see hear... circuit break yo' azz...

Rickety Rekt's picture

Chances are that no one on this forum ever saw true price discovery (in the market) in their lifetime.

lasvegaspersona's picture

Lucky Strike used to feature tobacco auctions in their ads...that looked legit....sold American!!!

Bigly's picture

Talk about cancer sticks....

HRClinton's picture

As a BTC/Crypto affectionado, I wholly deplore CME getting involved.

Nothing good can come out of it.  Nothing!

The Tribe and its Banksters are trying to muscle in and take over.  Same as always: By Deception...

SeuMadruga's picture

If the public keeps buying 'real' btc in lieu of this new CME cfd (which has no 'physical' settlement), maybe such attitude could eventually help the same logic to finally sink in for gold, thus curbing at least a little bit its blatant price manipulation through 'futures'...

Schmuck Raker's picture

"...so far in 2017 there have been two days in which bitcoin’s price swung more than 20% in a single day. There were 11 days in which it moved at least 13%, and 69 in which it moved at least 7%."

Put another way:

"CME Plans to lock clients out of bitcoin markets 2 1/2 months out of every year."