CME and Cboe to offer futures contracts in bitcoin
New York/Washington — Bitcoin rose after CME Group and Cboe Global Markets said they will offer futures contracts as soon as this month, capping a record-breaking week that made the digital currency the focus of investors from Wall Street to Main Street.
"This is going to bring large sums of money in this area," said Naeem Aslam, a chief market analyst at TF Global Markets in London. "It sends the message that the product does have some regulation around it and it is trading on the same exchange where other reputable derivatives are."
The world’s largest digital currency has surged about 30% this week, reaching a record high of $11,434 on November 29. The gains came with volatile intra-day price swings of as much as 20% as online exchanges struggled to handle the surging interest and as warnings of an asset bubble intensified. The currency has risen more than 11-fold this year.
"It will be interesting. I think it’s generally positive," billionaire venture capitalist Mark Cuban said in an e-mail. "What they charge is critical. Transaction costs are relatively high for bitcoin. If this pushes transaction costs lower it will be a benefit to the bitcoin market."
The move forward on futures is a watershed for Wall Street professionals — including institutional investors and high-speed traders — who’ve been eager to bet on crypto-currencies and their wild swings. But the new products will also spur federal regulation, with the contracts announced on Friday subject to oversight by the Commodity Futures Trading Commission (CFTC). The exchanges promised to help the agency surveil the underlying bitcoin market.
Under a process called self-certification the exchanges assured the CFTC that the new products complied with the rules. While it doesn’t technically require CFTC approval, the regulator could have stayed their plans if they weren’t satisfied. Friday’s announcement allows them to go forward.
Bitcoin, created in 2009, excited early investors with its potential use as a global currency, free from bank fees and government control. Transactions take place person-to-person around the world — anywhere there’s internet access.
There are other ways the new futures could spur more vigorous oversight of the crypto-currency; the contracts, for example, could make it easier to create an exchange-traded fund tied to bitcoin — even after a previous attempt was knocked down.