CME Seeks to Double Monthly Bitcoin Futures Trading Limit to 10K BTC

The Chicago Mercantile Exchange (CME Group) wants to let futures traders make even bigger bets on bitcoin. CME announced its intention to …

The Chicago Mercantile Exchange (CME Group) wants to let bitcoin futures traders hold a greater number of open positions at one time.

CME announced its intention to increase in the so-called spot month position limit for its bitcoin futures contracts in a letter to the U.S. Commodity Futures Trading Commission (CFTC) Thursday.

The limit would jump from 1,000 contracts per spot month to 2,000 for any single investor. Since each contract is for five bitcoin, the change means a trader’s maximum exposure would double from 5,000 bitcoin (worth about $50 million at current prices) to 2,000 contracts (10,000 bitcoin, or $100 million).

To be sure, few traders if any holding that many open positions right now, given that the exchange saw the number of open interest contracts reach an all-time high around 6,100 in July.

But the company sees room for this market to grow, and is seeking to increase these limits “based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market,” said the spokesperson.

If the CFTC does not object to the plan, the move will take effect on Sept. 30 for the October 2019 contract, wrote CME managing director and chief regulatory counsel Christopher Bowen in the letter.

Guardrails

According to the CFTC, position limits are designed to prevent “excessive speculation” in any commodities which underpin a futures product.

The concern is that without these limits, excessive speculation in a particular futures contract might cause the underlying asset’s price to fluctuate suddenly.

“In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low,” the CFTC website states.

As such, CME’s move on Thursday can be seen as a sign that the bitcoin market is maturing, as well as a sign that bitcoin futures contracts are better understood than they were previously.

Under the plan, the single month accountability level would remain at 5,000 contracts, meaning CME would continue to scrutinize only those traders whose open positions exceed the threshold.

A good year

CME launched its cash-settled futures contract at the end of 2017, alongside cross-town rival Cboe. However, Cboe announced in March that it would be shutting down its futures market, leaving CME as the sole exchange to offer the product in the U.S.

While CME is currently the only exchange to offer bitcoin futures in the country, the Intercontinental Exchange, through its ICE Futures US wing and Bakkt subsidiary, plans to offer physically-settled futures contracts later this month. A number of other companies are also looking to offer physically settled futures and forwards products.

The exchange has seen “20 successful, uneventful settlements,” the spokesperson said. It currently has a record number of large open interest holders at 56, and now sees an average daily volume of 7,100 contracts overall.

More than 1,200 traders have signed onto the platform since the beginning of 2019.

“This is one more way we’re providing customers, institutional traders and end-users with additional flexibility to trade and hedge bitcoin price risk,” the spokesperson said.

UPDATE (Sept. 13, 2019, 00:55 UTC): This article has been updated for clarity.

Tim McCourt, CME managing director of equity products and bitcoin futures image via CoinDesk archives

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CME Group not looking to be spoiler on LSE deal, CEO says

(Reuters) – CME Group Inc <CME.O>, the largest U.S. futures exchange operator, is not currently considering a counter bid to Hong Kong Exchanges …

(Reuters) – CME Group Inc <CME.O>, the largest U.S. futures exchange operator, is not currently considering a counter bid to Hong Kong Exchanges and Clearing’s <0388.HK> $39 billion takeover approach for the London Stock Exchange <LSE.L>, the head of the company said on Wednesday.

CME is “laser focused” on the integration of its recent $5 billion acquisition of UK-based financial technology company NEX and growing its core franchise, Chairman and Chief Executive Officer Terry Duffy said in an interview in New York.

Duffy said he was not surprised by Hong Kong’s interest in LSE, which is separately pursuing a $27 billion deal to buy data company Refinitiv, but added that the premium for the centuries-old British bourse was getting pretty high.

“It’s really a bet-the-franchise type of transaction and so you have to say to yourself, ‘well, who else could possibly get in there who’s got that kind of fire-power without betting the franchise’ and I don’t know anybody that does.”

(Reporting by John McCrank; Editing by Sandra Maler)

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CME Group to Launch New Shanghai Gold Futures Contracts In October

Subject to regulatory approval, the CME Group said that they plan to launch Oct. 14 two physical gold futures contracts; one will be denominated in …

(Kitco News) – Acknowledging China’s growing influence in the world gold market, the world’s leading futures and derivatives exchange is increasing its footprint in the nation and launching two new gold futures products next month.

Subject to regulatory approval, the CME Group said that they plan to launch Oct. 14 two physical gold futures contracts; one will be denominated in U.S. dollars and the other will be denominated in the renminbi. Both contracts will be settled using the Shanghai Gold Exchange (SGE) Gold Benchmark PM Price.

The contract sizes will be 1 kilogram, with the U.S. dollar contract priced in troy ounces and the renminbi contract priced in grams; both contracts will be listed on and subject to the rules and regulations of the COMEX.

Meanwhile, the SGE, the world’s largest physical gold exchange, will launch new T+N contracts these contracts will be linked to COMEX Gold Futures Asia Spot Prices and denominated in renminbi; the contract sizes will be 100 grams.

“We are extremely pleased to collaborate with SGE on these contracts that will bring market participants worldwide increased access to Chinese gold markets,” said Derek Sammann, Senior Managing Director, Global Head of Commodity and Options Products, CME Group. “The Shanghai Gold Benchmark is widely-regarded as the Renminbi-denominated gold benchmark, and the launch of these new gold contracts, combined with our ability to offer both USD and CNH contracts utilizing EBS CNH Benchmark, will create new opportunities for clients who want to access China’s physical gold prices alongside our liquid COMEX Gold futures and options.”

“The launch of these two new Shanghai Gold futures contracts by CME Group marks a significant step in the internationalization of the Shanghai Gold Benchmark,” said Wang Zhenying, President of SGE. “At the same time, our adoption of CME Group’s COMEX Gold Futures Asia reference prices for the settlement of SGE’s T+N contracts will provide our domestic market participants with the benefit of the world’s most recognized gold futures price as they manage their exposure to the physical gold market, so it’s a win-win cooperation between SGE and CME.”

According to the CME the new futures are a welcome addition for the gold industry.

In a statement, Zhen Mei, General Manager of Global Markets Department, Bank of China said that these will be a great tool for the industry.

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Reviewing Intercontinental Exchange Inc. (ICE)’s and Cboe Global Markets Inc. (:)’s results

The shares of both Intercontinental Exchange Inc. and Cboe Global Markets Inc. are owned by institutional investors at 92.5% and 0% respectively.

This is therefore a comparing of the dividends, analyst recommendations, profitability, risk, earnings and valuation, institutional ownership in Intercontinental Exchange Inc. (NYSE:ICE) and Cboe Global Markets Inc. (:). The two are both Diversified Investments companies that compete with one another.

Valuation and Earnings

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Intercontinental Exchange Inc. 83 10.35 N/A 3.48 25.28
Cboe Global Markets Inc. N/A 0.00 N/A 0.00 0.00

Table 1 shows top-line revenue, earnings per share (EPS) and valuation of the two companies.

Profitability

Table 2 shows Intercontinental Exchange Inc. and Cboe Global Markets Inc.’s return on equity, return on assets and net margins.

Net Margins Return on Equity Return on Assets
Intercontinental Exchange Inc. 0.00% 11.8% 2.3%
Cboe Global Markets Inc. 0.00% 0% 0%

Analyst Ratings

In next table is delivered Intercontinental Exchange Inc. and Cboe Global Markets Inc.’s ratings and recommendations.

Sell Ratings Hold Ratings Buy Ratings Rating Score
Intercontinental Exchange Inc. 0 2 2 2.50
Cboe Global Markets Inc. 0 0 0 0.00

Intercontinental Exchange Inc. has a consensus target price of $89.25, and a -5.94% downside potential.

Insider and Institutional Ownership

The shares of both Intercontinental Exchange Inc. and Cboe Global Markets Inc. are owned by institutional investors at 92.5% and 0% respectively. About 0.5% of Intercontinental Exchange Inc.’s share are owned by insiders.

Performance

In this table we show the Weekly, Monthly, Quarterly, Half Yearly, Yearly and YTD Performance of both pretenders.

Performance (W) Performance (M) Performance (Q) Performance (HY) Performance (Y) Performance (YTD)
Intercontinental Exchange Inc. -1.56% 1.97% 8.91% 15.27% 18.27% 16.63%
Cboe Global Markets Inc. -2.1% 2.45% 8.18% 16.88% 13.06% 11.73%

For the past year Intercontinental Exchange Inc. has stronger performance than Cboe Global Markets Inc.

Summary

Intercontinental Exchange Inc. beats Cboe Global Markets Inc. on 9 of the 9 factors.

Intercontinental Exchange, Inc. operates regulated exchanges, clearing houses, and listings venues for financial and commodity markets in the United States, the United Kingdom, Continental Europe, Israel, Canada, and Singapore. It operates in two segments, Trading and Clearing, and Data and Listings. The company operates marketplaces for trading and clearing an array of derivatives and securities contracts across various asset classes, including energy and agricultural commodities, interest rates, equities, equity and credit derivatives, exchange traded funds, bonds, and currencies. It primarily provides price discovery and trade execution, listings, trade processing and data repositories, clearing and related post-trade activities, data, and benchmark administration services. The company operates exchanges and marketplaces, such as ICE Futures Europe, ICE Futures U.S., ICE Futures Canada, ICE Endex, ICE Futures Singapore, and NYSE Amex and NYSE Arca Options, as well as over-the-counter markets for physical energy and credit default swaps, and central counterparty clearing houses. It serves commodity producers and consumers, financial institutions, money managers, trading firms, and other business entities; various market participants in the equities markets, such as financial institutions, institutional investors, wholesalers, hedge funds, quantitative funds, algorithmic traders, and individual investors; and members, which are entities registered as broker-dealers with the Securities and Exchange Commission. The companyÂ’s customers also comprise companies operating in a range of sectors, including technology, financial services, consumer brands, industrial, transportation, media, energy, and mining; the financial services industry; and value added resellers, such as custodians, wealth managers, software providers, and other outsourcing organizations. Intercontinental Exchange, Inc. was founded in 2000 and is headquartered in Atlanta, Georgia.

CBOE Holdings, Inc., through its subsidiaries, operates as an options exchange in the United States. It offers marketplaces for trading options on various market indexes; futures on the VIX Index; options on the stocks of individual corporations comprising equity options; and options on other exchange-traded products that include ETP options, such as exchange-traded funds and exchange-traded notes, as well as other index options. The company owns and operates CBOE primary options market, which offers trading in listed options through a single system that integrates electronic trading and traditional open outcry trading on its trading floor in Chicago; CFE, an all-electronic futures exchange, which provides futures on the VIX Index, as well as on other products; and C2, an all-electronic exchange that offers trading for listed options. Its exchanges operate on its proprietary technology platform, known as CBOE Command. The company has a strategic relationship with S&P OPCO LLC; FTSE Russell; MSCI Inc.; and S&P Dow Jones Indices, LLC. CBOE Holdings, Inc. was founded in 1973 and is headquartered in Chicago, Illinois.

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Cboe Global’s (CBOE) August Volume Increases Year Over Year

CME Group’s ADV of 24.3 million contracts for August 2019 were up 53% year over year. This marks the second-highest monthly ADV of the company.

Cboe Global Markets, Inc. CBOE posted total average daily volume (ADV) of 8.8 million contracts, improving 24.8% year over year driven by solid performance across Options and Futures. Though U.S. Equities witnessed increase, European Equities and global forex declined.

Total contracts for the month were nearly 194 million, up 19.4% year over year. Of this, Options improved 18.7% to 186.1 million while Futures increased 36.2% to 7.9 million. Options’ ADV was 8.5 million whereas Futures’ ADV was 0.4 million.

Total volumes of U.S. Equities came in at 28 billion shares, up 11.9% year over year. European Equities reflected a 28.5% deterioration year over year to €146.9 billion whereas Global FX fell 9.2% to $728 billion.

Nonetheless, CBOE Global should continue witnessing solid average daily volumes given its compelling product portfolio. This drives transaction fees, which account for the lion’s share of total operating revenues.

The Zacks Rank #3 (Hold) derivatives exchange in the United States has a strong market position and global reach with strength in its proprietary products, primarily SPX options, VIX options and VIX futures.

The company is also exploring new markets like the Middle East, Scandinavia and Asia, while pursuing jurisdictional approval in more established markets, including Switzerland and Israel. In its efforts to boost growth, the company plans to launch CBOE Closing Cross, a new post-close trading service operating across 18 European markets in October 2019 and intends to bring similar product in the U.S. Equities market too.

Shares of CBOE Global Markets have outperformed the industry quarter to date. The stock has rallied 15% compared with the industry’s increase of 13.3%. Diversified product portfolio, compelling growth, expense synergies, increasing transaction fees and solid liquidity position should continue to help retain the bull run.

Recently, other securities exchanges, namely Nasdaq Group Inc. NDAQ, MarketAxess Holdings Ltd. MKTX and CME Group Inc. CME also posted their respective monthly volumes.

CME Group’s ADV of 24.3 million contracts for August 2019 were up 53% year over year. This marks the second-highest monthly ADV of the company. Nasdaq’s U.S. equity options volume increased 5.4% year over year to 157 million contracts, European options and futures volume rose 33.9% year over year to 7.5 million contracts. MarketAxess’ total volume of $172.8 billion included $85.2 billion in U.S. high-grade volume, $83 billion in other credit volume and $4.6 billion in liquid products volume.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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