Derivatives marketplace CME Group announced on Friday that, starting next year, it will offer options on its Bitcoin futures contracts. The company launched its futures product back in December 2017, at the same time as the Chicago Board Options Exchange (CBOE) did the same.
In its announcement today, CME said that this step is made in order to provide clients with “additional tools for precision hedging and trading.” The launch is still pending regulatory review.
Tim McCourt, CME Group global head of equity index and alternative investment products, 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.”
The company also said that, since the 2017 launch, it has seen 20 “successful” futures expiration settlements, with more than 3,300 individual accounts trading the contracts. That means, that almost 7,000 CME Bitcoin futures contracts are traded on average every day.
Half-year ago, CBOE suddenly decided to change their approach and went on to terminate the futures product. With that step, CME became the only provider of Bitcoin futures in the States.
The New Rival is Coming
However, starting from Monday, CME will have a new rival. When the Intercontinental Exchange and its branch Bakkt begin offering a new futures product this will become a pretty competitive market.
Also, dissimilar to CME’s cash contracts, ICE will be offering a physically settled product. That means that users will receive actual Bitcoin instead of the cash equivalent.
Also, it’s important to mention that some analysts believe that Bakkt would do wonders for Bitcoin. There is something to be said for the fact that projects like Bakkt, ErisX, LedgerX and the likes coming into the sector means that there is significant progress especially with the prospect of increased liquidity for the Bitcoin market.
However, the largely “unregulated” nature of the cryptocurrency market might be a significant reason why growth is somewhat stifled. Every year, Bitcoin offers never before seen rates in Return on Investment (ROI) but many institutional investors have at different times in the past, expressed certain worries about diving into unregulated terrain. Some of the biggest movers are even disallowed by law from dabbling in, for the exact same reason.
The truth is that last few days the market has significantly cooled off but that doesn’t mean that there is no demand – small though, but growing. Institutional and retail traders are getting more and more heated for futures and options.
As per data from the company, there are about 3,300 individual accounts that are dealing with Bitcoin future trading at the CME. They added that around 7,000 contracts trade every day. That represents a pretty small part of the 4.3 million contracts that are traded daily on the exchange across all its offerings, which include derivatives tied to energy, stock indexes and interest rates.
