CFTC Statement on Bitcoin Futures Trading and Swaps

The CFTC released a statement of three regulated US Exchanges, CME, CFE, and Cantor self-certified new contract for Bitcoin futures and products.

On Friday December 1st, the CFTC announced that the world’s largest futures exchange, the Chicago Mercantile Exchange (CME) completed self-certification with the Commission to launch Bitcoin futures contract on December 18. Futures contracts allows traders to bet on Bitcoin prices without buying the Cryptocurrency. Self-certification with the CFTC permits designated contract markets to list products for trading certifying that the new product does not violate any provisions or regulations.

The CBOE Futures Exchange (CFE), one of the world’s largets holding exchange, also filed certification for Bitcoin futures with the CFTC. They have not yet announced when the launch of their Bitcoin futures, XBT will be trading on their platform.

The Cantor Exchange self-certified a new contract for Bitcoin swaps with the CFTC and intends to announce a trading date shortly. They stated that Bitcoin Swaps would be unleveraged with the option to trade over a range of Bitcoin prices.

CFTC Says Bitcoin Futures Still a Risk

The CFTC stated that due to the nature of Bitcoin being a virtual currency a “commodity unlike any the Commission has dealt with in the past,” they had extensive discussions with the exchanges and their new product contracts to protect consumers and safe market place. “In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin.”

In a press release, the CME Group Chairman and CEO Terry Duffy stated satisfaction with the negotiations, “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.”

CFTC Chairman, J. Christopher Giancarlo emphasized that the Bitcoin cash market remains unregulated and that investors take heed of the risk and volatility of this new market:

“Market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority. There are concerns about the price volatility and trading practices of participants in these markets. We expect that the futures exchanges, through information sharing agreements, will be monitoring the trading activity on the relevant cash platforms for potential impacts on the futures contracts’ price discovery process, including potential market manipulation and market dislocations due to flash rallies and crashes and trading outages. Nevertheless, investors should be aware of the potentially high level of volatility and risk in trading these contracts.”

The CFTC included in their release that once the contracts launch they will engage in “a variety of Risk-monitoring activities.” They will be working closely with the National Futures Association (NFA). Duff also pointed to the volatility of the new Bitcoin market and that their futures contract includes risk controls,

“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.”

As with all contracts, this is not a Commission endorsement of the use of virtual currency products or derivatives.

Full CFTC press release here.

Share this post

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email

Stay On Top Of The Debt Relief Industry's Regulatory Landscape

On November 6-7, 2022, Shipkevich PLLC will be hosting a Regulatory Workshop in Costa Mesa, California focusing on the fundamental regulatory issues facing debt relief professionals and how they can adapt.