Nasdaq — the second-largest traditional exchange in the world — made waves weeks ago when it was outed as potentially developing a bitcoin futures product. Now, Nasdaq CEO Adena Friedman is saying this coming product would be different in kind from other early-bird competitors’ offerings.
A Unique Product
In new sit-down comments with the press, Nasdaq CEO Adena Friedman emphasized the powerhouse exchange’s potential bitcoin futures product was being explicitly proposed to stand in contrast to the current bitcoin futures contracts CME Group and the Cboe have deployed.
Friedman suggested the process was already well along:
“We are continuing to investigate the idea of a cryptocurrency futures (contract) with a partner and we continue to look at the risk management around that, making sure we are putting the right protocols in place, making sure there’s proper demand, and that the contract is different from what’s already out there.”
In getting into specifics, Friedman said Nasdaq was focusing on “total return futures, so it’s a little bit of a different construct” than the future price method already used by Cboe and CME. Spot rates may be in order, then.
No word for now on a timeline, either. Friedman noted:
“We will have to see whether it makes sense at the end of the day, proper client demand, and on a risk-management side ‘do we feel confident?,’ in which case we would look to go to the CFTC (Commodity Futures Trading Commission).”
Crypto Repos Coming?
Per an illuminating new report from The Wall Street Journal reporter Laurence Fletcher, the next buzzy phenomenon after bitcoin futures could be the practice of “repos” coming to the cryptoverse.
As Fletcher explains:
“So-called repos are commonplace in the financial system, involving trillions of dollars and are typically used by banks. They allow a borrower to raise cash in the short term by selling bonds, which the borrower agrees to buy back at a later date and pay a fee for the privilege.”
The journalist goes on to note that Alex Grebnev — a former banker with Goldman Sachs — is working on a platform named Oracle that’s going to let cryptocurrency traders lend, borrow, and short different cryptos in the space.
Fletcher explains the idea behind Oracle’s repo shorting dynamic:
“It also allows [traders] to short—bet on a falling price—the cryptocurrency they borrow against the one they lend, mimicking a common tactic among hedge funds. The investor can sell the cryptocurrency they borrow on the open market and hope to buy it back at a lower price, pocket the difference and return the currency to the lender. Meanwhile, they are betting the currency they handed over as collateral doesn’t fall by as much as the one they borrow.”
Looks like decentralized shorting is finally about to get its day in the ecosystem, too.
What’s your take? Is Nasdaq going to be a game changer in the bitcoin futures marketplace? Sound off in the comments below.
Images via Market Watch, CNBC