Now the Start date is fixed. The world’s largest derivatives exchange Chicago Mercantile Exchange (CME) starts trading in the Bitcoin Future on December 18. In the current CME publication, it is pointed out that the creation of this futures contract has been closely associated with the Commodities Exchange regulator “CFTC”. This US authority is very strict and regulates the futures and options markets in the US down to the last detail.
The mere fact that the US authorities have approved this futures contract is giving Bitcoin a veritable boost of seriousness. Whether rightly, let’s leave a question in the room. We spoke already in previous articles of a knighthood of the first order. A detail which is very important for traders has already been revealed. Probably because of the high fluctuation intensity in the Bitcoin the Bitcoin Future will have a margin of 35%, at least at the beginning.
This is a very high percentage for futures trading. But the Bitcoin is not a “normal” underlying for derivatives, unlike indices, foreign exchange etc. They do not fluctuate daily 10% or 20% up and down. In addition, the Bitcoin Future also offers maximum price limits within one trading day as additional security features. The contract will have a cash settlement. So there will be no real delivery of bitcoins, just a cash settlement of gains and losses.
The price of the underlying is determined by a basket price, which is formed through the average of bitcoin prices at several trading platforms. This is probably an important point, since bitcoin prices are not made on a centralized exchange. Often this leads to deviating prices. Due to the basket price, the base price presentation as a basis for the future is at least a little bit more reliable. And the current Bitcoin price, what does it do? In the minutes after CME´s announcement, the price has risen more than $ 300 to $ 10,500 (charting since early morning on friday).
Here the CME in it´s wording:
„We are pleased to bring Bitcoin futures to market after working closely with the CFTC and market participants to design a regulated offering that will provide investors with transparency, price discovery, and risk transfer capabilities,“ said Terry Duffy, CME Group Chairman and Chief Executive Officer. „Though we have worked through a lengthy, comprehensive process with the CFTC to get to this point, we recognize bitcoin is a new, uncharted market that will continue to evolve, requiring continued collaboration with the Commission and our clients going forward. At launch, our new Bitcoin futures contract will be subject to a variety of risk management tools, including an initial margin of 35 percent, position and intraday price limits, and a number of other risk and credit controls that CME Group offers on all of its products.“
The new contract will be listed on and subject to the rules of CME. It will be available for trading on the CME Globex electronic trading platform, and for submission for clearing via CME ClearPort, effective on Sunday, December 17, 2017 for a trade date of December 18.
CME Group’s Bitcoin futures will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. Since November 2016, CME Group and Crypto Facilities Ltd. have calculated and published the BRR, which aggregates the trade flow of major bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time. The BRR is designed around the IOSCO Principles for Financial Benchmarks. Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR.