Bitcoin Soars After CFTC Approves Futures Trading: First Trade To Take Place Dec.18

Bitcoin is back over $10,000 after the the CFTC confirmed what had been previously reported, namely that it would allow bitcoin futures to trade on two exchanges, the CME and CBOE Futures Exchange, also granting the Cantor Exchange permission to trade a contract for bitcoin binary options.

The CFTC announced that through a process known as "self-certification," CME and Cboe stated that their contracts comply with U.S. law and CFTC regulations. The US commodity regulator also said that the it held “rigorous discussions” with the exchanges that resulted in improvements to the contracts’ designs and settlement.

As to when the first bitcoin futures will cross the tape, the CME said it has self-certified the initial listing of its bitcoin futures to launch Monday, December 18, 2017.

Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past,” said CFTC Chairman J. Christopher Giancarlo. “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.”

Market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority. There are concerns about the price volatility and trading practices of participants in these markets. 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.”

In response to the news, Bitcoin has surged back over $10,000...

... and lifted the entire crypto space higher.

Some more details from the press release:

As trading on these DCMs evolves, the Commission will continue to assess whether further changes are required to the contract design and settlement processes and work with the DCMs to effect any changes.

 

Once the contracts are launched, Commission staff will engage in a variety of risk-monitoring activities.  These activities include monitoring and analyzing the size and development of the market, positions and changes in positions over time, open interest, initial margin requirements, and variation margin payments, as well as stress testing positions.  Commission staff will additionally conduct reviews of designated contract markets, derivatives clearing organizations (DCOs), clearing firms and individual traders involved in trading and clearing bitcoin futures.

 

The CFTC will also work closely with the National Futures Association (NFA). NFA has issued an investor advisory on this topic to its members, including futures commission merchants and introducing brokers that are involved in the trading of any virtual currency futures product, and will closely monitor its member firms trading this product. If the Commission determines that the margin the DCOs hold against bitcoin futures positions is inadequate, it can take measures to require that the margin held at the DCOs be increased, including requiring that they use a longer margin period of risk to generate margin requirements.

 

As with all contracts offered through Commission-regulated exchanges and cleared through Commission-regulated clearinghouses, the completion of the processes described above is not a Commission approval. It does not constitute a Commission endorsement of the use or value of virtual currency products or derivatives.  It is incumbent on market participants to conduct appropriate due diligence to determine the particular appropriateness of these products, which at times have exhibited extreme volatility and unique risks.

 

The Commission, pursuant to its statutory mission, will continue to foster open, transparent, competitive and financially sound markets. The CFTC will monitor markets and work closely with the exchanges to avoid systemic risk and to protect market users and their funds, consumers and the public from fraud, manipulation and abusive practices related to products that are subject to the Commodity Exchange Act.

In other news, it is yet to be determined what initial and variation margin the CME/CBOE will demand for bitcoin trades.

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So what does the start of bitcoin futures trading mean? Here is one explanation as posted last night from DataTrek's Nicholas Colas:

What will the entrance of futures exchanges and bitcoin contracts do to the price?

 

Both the CME and CBOE are set to launch bitcoin futures soon, and today the NASDAQ threw its hat in the ring as well. Moving bitcoin into a regulated structure will allow more sorts of investors and traders to speculate on price moves in the currency. That, the thinking goes, should be good for bitcoin prices.

 

One intriguing point: shorting bitcoin is currently a clunky process, but futures markets will make it much easier. The difficulty of shorting bitcoin has been an underappreciated feature of its meteoric rise, limiting true price discovery. Whether anyone is brave enough to put on a sizable short position remains to be seen. But someone who wants to back up their “Bitcoin is a fraud” talk with dollars will soon have a place to express their viewpoint.

Comments

GoinFawr jcaz Fri, 12/01/2017 - 12:33 Permalink

You could be right jcaz, but 'those boys' had a clue enough to know which way the wind was blowing to land a 10 plus-bagger (or more), what makes you so sure they're not holding a wet finger to the sky right now? "Fri, 12/06/2013 - 22:58 | GoinFawrBTC: the gold you can't hold"You 'sour grapes' types are kind of pathetic, with your short memories and even shorter lived schadenfreude that blows back into your sneering faces while you continue pissing into the wind.

In reply to by jcaz

marysimmons sodbuster Fri, 12/01/2017 - 10:35 Permalink

ZH consistently, and wrongly, tries to correlate BTC price movements with events occurring in the western legacy financial system.  The $USD price of BTC was heading back up anyway, after a much needed 15-20% correction.  Most of the BTC trading occurs in east Asia - Japan, Korea, China.  BTC, and decentralized digital currencies in general, are a planetary phenomenom, not US centric, as the typical American likes to imagine.

In reply to by sodbuster

Ghordius marysimmons Fri, 12/01/2017 - 10:40 Permalink

+1 yupand... the same for gold, actually. Asia, particularly China, India, Japan, Russia, Iran, Turkey being all way more important for gold... but somehow still comments of the very US-centric kindclicks. you give the right bias, you get the clicks and ad revenueas in There Is No Such Thing As A Free Lunchas in If It Is For Free... You Are The Product

In reply to by marysimmons

Crazy Or Not Ghordius Fri, 12/01/2017 - 12:03 Permalink

+1 Agreed!It really tickles me the insanity of commoditizing a "logarithm" ...while I appreciate that some are doing well from this - good luck BTW. There's a more philosophical view that as a culture we're chasing our tails if Sine's, Cosine's or Tangents have gone up or down this week. - How exactly does that add value to our culture, put food on the table or get something built? There are bigger questions of the very convienient flash crash every quarter, must be a thrill for HFT crews - easiest money ever.So way beyond nuts and won't end well.Gold, Platinum & Silver...oh and Molybdenum...lots of Molybdenum!!! ;)  

In reply to by Ghordius

PTR Ajax-1 Fri, 12/01/2017 - 13:16 Permalink

Unless these exchanges are actually buying bitcoin, or doing margin trading on crypto exchanges (which also requires buying,) these are just naked bets people are making.  BTC is gonna BTC regardless of what people betting on it makes.  The fiat exchanges are just finding new ways to create churn and get cash flow from it.

In reply to by Ajax-1

Drachma Latina Lover Fri, 12/01/2017 - 08:53 Permalink

LL, while you may be correct, I think the situation is a bit more complicated. I don't subscribe to the meme that bitcoin is the banksters nemesis. I see this whole blockchain paradigm as something of a brilliant chess move on the part of the powers that be. When I hear so many well-meaning geeks tripping over themselves to extol the virtues of this computational manna from heaven, and heralding the coming victory over their long-standing oppressors through the use of cryptocurrency, my intuition tells me its not that simple, and their is more at play than meets the digital eye.

I personal think they will continue to pump this to the point where most will be convinced they must get on board. Look to the IMF's plans with ACC and the SDR. A one-world currency is right around the corner. Those making fortunes off this current speculative phase are the carrot for the rest. Can anyone deny that emotions are being fabulously manipulated. The established powers think many moves ahead of the rabble.

The best I can sum it up at this point is using the words of Karl Popper; "Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve." In other words people think they understand cryptocurrency and its ultimate role. They are mesmerized, and that frightens me. Just a humble thought. Cheers.

In reply to by Latina Lover

konputa Bendromeda Strain Fri, 12/01/2017 - 10:08 Permalink

Yeah I've been saying this for years. And I find it funny that coinerz don't seem the least bit concerned about this and instead ridicule those that bring forward this fact.Here's one from the past and check out the lack of activity on this article too.http://www.zerohedge.com/news/2017-06-12/exposed-real-creator-bitcoin-l… comments and less than 31k views as I link to it.

In reply to by Bendromeda Strain

Mustafa Kemal Drachma Fri, 12/01/2017 - 10:11 Permalink

 ""Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve."Popper is sharp. But I dont get the connection. Does this apply to the bitcoin is tulips theory? Many of its supporters think it is the only possible one.Indeed, most of their tulip posts seem to"sign that they have neither understood the theory nor the problem which it was intended to solve."

In reply to by Drachma

RedDwarf Drachma Fri, 12/01/2017 - 12:51 Permalink

So according to you their brilliant chess move is to create a secure decentralized ledger based money that they have no cotnrol over, and when everyone is using that somehow convince everyone to switch to something totally different?  And your fear is that they will somehow pull this off this magic trick and manage to do what?  Reproduce the system they already have right now?  97% of the money is already digital fiat anyway.You make no sense at all.

In reply to by Drachma

jeff montanye ZH Snob Fri, 12/01/2017 - 09:16 Permalink

who is to say?  the p.m.'s may very well be near a point of liberation when sufficient physical demand (stand for delivery) outruns the tiny stores of the futures exchanges.  and why wouldn't selling of near term futures affect spot prices with cryptos as they do with other commodities?  of course such exchange moves would be vulnerable to a short squeeze by demanding bitcoins rather than dollars, etc.

In reply to by ZH Snob