CME Unveils Bitcoin Futures Circuit Breakers

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.


nope-1004 Juggernaut x2 Tue, 11/07/2017 - 18:15 Permalink

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. 

In reply to by Juggernaut x2

marysimmons AtATrESICI Tue, 11/07/2017 - 18:25 Permalink

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

In reply to by AtATrESICI

Winston Churchill Bumpo Tue, 11/07/2017 - 20:25 Permalink

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 towork,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.  

In reply to by Bumpo

ZorroHedge marysimmons Wed, 11/08/2017 - 03:28 Permalink

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.

In reply to by marysimmons

Bumpo Juggernaut x2 Tue, 11/07/2017 - 18:43 Permalink

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.

In reply to by Juggernaut x2

HRClinton Tue, 11/07/2017 - 18:12 Permalink

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...

Schmuck Raker Tue, 11/07/2017 - 18:13 Permalink

" 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."