• Bitcoin Derivatives Are Here
  • January 11, 2018 | Authors: Andrew Keith Wichmann; Michele Bresnick Walsh
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • On Friday, December 1, 2017, the Commodity Futures Trading Commission (CFTC) announced that it is permitting the listing of bitcoin derivatives contracts on three United States commodities exchanges. The Chicago Mercantile Exchange (CME) and the CBOE Futures Exchange (CBOE) will begin listing bitcoin futures contracts in December 2017, while the Cantor Exchange plans to list bitcoin binary options beginning in the first half of 2018. The three exchanges were approved under the CFTC’s self-certification process after several months of negotiation over controls to address the potentially high volatility in bitcoin prices. For example, CME’s notification letter states that it will implement trading cooling-off periods at prices that hit 7% and 13% above or below the most recent daily settlement price and will halt daily trading at prices that exceed 20%. The exchanges can use settlement prices based on the trading prices of widely used bitcoin exchanges. For example, CME will clear through its clearinghouse, CME Clearport, at a settlement price that is a composite of the trading prices of Bitstamp, GDAX, itBit and Kraken, which together represent approximately 35% of global U.S. dollar bitcoin trading. One hope for bitcoin derivatives is that they will help dampen price swings in the commodity. In 2017 alone, the value of bitcoin has increased from $900 to currently over $11,000.