CME Asks CFTC to Double Bitcoin Futures Capacity as Interest Soars

The Chicago Mercantile Exchange (CME) Group is petitioning United States regulators to allow its clients to double their open Bitcoin futures positions …

The Chicago Mercantile Exchange (CME) Group is petitioning United States regulators to allow its clients to double their open Bitcoin futures positions.

Double open positions limit, says CME

According to Nasdaq on Sept. 12, CME has already put its plans before the Commodity Futures Trading Commission (CFTC).

If successful, each investor would gain a monthly limit of 2,000 contracts per spot month instead of the current 1,000.

The move comes on the back of constant growth in demand for Bitcoin futures, with CME’s volumes setting new records on a regular basis.

As Nasdaq notes, the CFTC officially states that lower-risk trading instruments are not subject to limits. Therefore, an agreement to lessen the strict controls for CME could be construed as the regulator having more faith in Bitcoin (BTC) options than before.

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

March of the Bitcoin futures contracts

CME was one of the first Bitcoin futures operators, launching its product in December 2017. Since then, the market has expanded, with the second half of this year set to see a significant increase in overall interest.

Later in September, Bakkt, the regulated trading ecosystem for institutional investors, will launch physical Bitcoin futures, which pay out returns in BTC instead of fiat currency.

Cryptocurrency exchange Binance is currently testing two potential futures trading platforms.

Related Posts:

  • No Related Posts

CME looks to double monthly open positions limit of its bitcoin futures contracts

The Chicago Mercantile Exchange (CME Group), the only exchange that currently provides bitcoin futures contracts in the U.S., is looking to double …

The Chicago Mercantile Exchange (CME Group), the only exchange that currently provides bitcoin futures contracts in the U.S., is looking to double open positions limit of the product.

CME has written to the U.S. Commodity Futures Trading Commission (CFTC) for the proposed move, which would increase the limit from 1,000 contracts per spot month to 2,000.

One contract is for five bitcoins, which means the change, once cleared by the CFTC, would increase a trader’s maximum exposure to 10,000 bitcoins from the current 5,000. The change would then take place from the Oct. 2019 contract month and all contract months thereafter.

CME Group has been offering bitcoin futures contracts since late 2017, and the exchange is now gearing up to launch another bitcoin derivatives product, as reported by The Block last week. The new product could launch before the end of this year.

Related Posts:

  • No Related Posts

CME Wants to Double Its Monthly BTC Futures Trading Cap to USD 100M

The Chicago Mercantile Exchange (CME Group) has announced that it intends to double its monthly Bitcoin futures trading cap to BTC 10,000 (USD …

The Chicago Mercantile Exchange (CME Group) has announced that it intends to double its monthly Bitcoin futures trading cap to BTC 10,000 (USD 103 million) – and has already asked America’s Commodity Futures Trading Commission (CFTC) for regulatory permission.

Currently, individual investors may not purchase more than 1,000 contracts per month, with each contract representing BTC 5. But per a letter to the CFTC hosted on the CME Group’s website, the group says it wants to boost that number to 2,000, for a maximum limit of BTC 10,000.

The company says it “deems [the new proposed limit] to be adequately stringent to discourage attempted manipulation of the Bitcoin Reference Rate benchmark in connection with final settlements of expiring contracts.”

The CME says that its increased spot month limits will become effective at the close of trading on September 30 for the contract month of October 2019 and subsequently, although its move is still subject to CFTC approval.

Watch the latest reports by Block TV.

The company took to Twitter to further explain its decision.

Increased spot-month position limits in CME Bitcoin futures will be available Sept 30, pending reg review. Limits w… https://t.co/hBvsnn2fLD

— CMEGroup (@CMEGroup)

The CME Group is currently the only American entity offering Bitcoin futures, after the group’s rival, the Chicago Board Options Exchange (CBOE) pulled the plug on its own offering in March this year.

CME Wants to Double Its Monthly BTC Futures Trading Cap to USD 100M 101
The number of contracts traded on the selected date for all CME Group venues. Source: CME Group

However, as previously reported on Cryptonews.com, Bakkt has already begun testing its own Bitcoin futures product, and hopes to begin offering this via the ICE Futures US exchange starting September 23.

Earlier this week, Bitcoin.com stated that it was hopeful of convincing the CME Group to list Bitcoin Cash futures derivatives.

Meanwhile, major cryptocurrency exchange Binance said that their Binance Futures will go live today, September 13. The company added that all users will receive a 50% discount on trading fees when trading on Binance Futures for the next 3 months.

At pixel time (06:21 UTC), bitcoin trades at c. USD 10,367 and is up by 2.5% in the past 24 hours, while it’s down by more than 3% in the past week.

Related Posts:

  • No Related Posts

Cryptocurrency Derivatives Series: CME Group Writes CFTC to Increase Open Positions of Bitcoin …

August month for the crypto-asset markets saw a bearish end. Market benchmark BTC fell 6.67% and 4.6% July and August months respectively, while …

August month for the crypto-asset markets saw a bearish end. Market benchmark BTC fell 6.67% and 4.6% July and August months respectively, while the overall crypto market cap pulled back 5%. The underlying price has been oscillating between $9,500 to $10,500 levels from the last couple of weeks.

It has been observed that a probable cause of such drop was due to the close of a major round of CME Bitcoin futures contracts. Over 50% of CME Bitcoin futures open interest expired in recent times. It’s likely that most of this money flowed out of Bitcoin futures and into other derivative markets.

But for now, in a letter to the Commodity Futures Trading Commission (CFTC) regarding the increase of spot-month position limits for the Bitcoin Futures Contract, CME revealed their plans to increase the same.

Wherein, one can observe that the limit likely to surge from 1,000 contracts per spot month to 2,000 for a single investor. Earlier each contract comprised of 5,000 bitcoins, the alteration would imply a trader’s maximum exposure would double from 5,000 bitcoins to 2,000 contracts (i.e. 10,000 bitcoins, or worth $100 million approximately).

Daily volumes for BTC on the CME have been steadily falling over the last two months and institutional traders may be looking at other asset markets for new profit opportunities.

The BTC market has been able to consolidate following recent price drop with the $9500 level acting as support as the intermediate trend progressed.

As you could refer to BTC CME Futures price chart of daily plotting, hammer pattern candlesticks have occurred at $10,154 levels and taken off rallies above DMAs with little indecisiveness.

Related Posts:

  • No Related Posts

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

Related Posts:

  • No Related Posts