CME head Terry Duffy today confirmed bitcoin futures trading will begin in the second week of December 2017, albeit with an increased capacity to shut down the market during periods of volatility.
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Bitcoin Futures Market Will Attract Institutional Investors
Duffy was discussing the upcoming specifics of bitcoin futures trading on CNBC, where the host was intent on highlighting the fact a futures market provides large institutional investors with a way to short BTC.
CME Chairman & CEO announces Bitcoin Futures to launch 2nd week of december on CNBC.
— Whalepool (@whalepool) November 13, 2017
This is a long-awaited development, but Duffy doesn’t see it as a negative, commenting that the function of the CME is to provide risk management:
“I’m not here to predict the price of products, I’m here to provide risk management … I think sometime in the second week of December you’ll see our contracts list for trading”.
In this capacity, CME bitcoin futures will have a circuit-breaking feature in the area of 20 percent, where if volatility spikes to that amount, the market will be temporarily stopped.
The frequency of such volatility may mean the BTC circuit breaker will have longer downtimes than the few seconds we generally see in stock markets, and Duffy believes this will help improve the shape of the market
“Right now when the markets move precipitously we’ll stop them for a microsecond or a minute. With this product these bumpers are going to be a lot longer. So even though we’ll have intraday limits, we also will have the velocity of functionality that might stop the Bitcoin market for an hour…so that will add a lot more structure to the marketplace.”
Could Bitcoin’s Volatility Be a Problem?
Despite seeing his product as a risk management tool, there is concern amongst market participants that operating on thin margin in such a volatile product is extremely dangerous. Moreover, measures to protect against it may even be unwelcome:
They shouldn't be allowed liquidation protection when stepping into the wild west.
— Double Tops (@2xtops) November 13, 2017
However, Duffy was quick to point out that CME will have safeguards in place “like for any other product”, commenting that trading will be stopped “if we think the product is ‘going away’; we have the longs, we have the shorts, we’ll match them up at a price – that’s the way our rules read today.”
What effect will CME bitcoin futures have on the BTC market? Let’s hear your thoughts.
Images via Wikimedia Commons, Twitter