CME Group announced today it intends to launch bitcoin futures in the fourth quarter of 2017, pending all relevant regulatory review periods. The new contract will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin.
Since November 2016, CME Group and Crypto Facilities Ltd. have calculated and published the BRR, which aggregates the trade flow of major bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time. The BRR is designed around the IOSCO Principles for Financial Benchmarks. Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR.
“We are excited to work with CME Group on this product and see the BRR used as the settlement mechanism of this important product. The BRR has proven to reliably and transparently reflect global bitcoin-dollar trading and has become the price reference of choice for financial institutions, trading firms and data providers worldwide.”
CME Group and Crypto Facilities Ltd. also publish the CME CF Bitcoin Real Time Index (BRTI) to provide price transparency to the spot bitcoin market. The BRTI combines global demand to buy and sell bitcoin into a consolidated order book and reflects the fair, instantaneous U.S. dollar price of bitcoin in a spot price. The BRTI is published in real time and is suitable for marking portfolios, executing intra-day bitcoin transactions and risk management.
There could be multiple futures markets on the way, after signing an exclusive BTC market data deal with Gemini Exchange in August, CBOE’s CEO Ed Tilly said, “we very much look forward to responding to the growing interest in cryptocurrencies through the creation of bitcoin futures traded on a regulated derivatives exchange, with the many expected benefits that this brings, including transparency, price discovery, deep liquidity and centralized clearing.” Cash-settled bitcoin futures were planned to be made available for trading on CBOE Futures Exchange (CFE) by the fourth quarter of 2017.
Cryptocurrency market capitalization has grown in recent years to $172 billion, with bitcoin representing more than 54% of that total, or $94 billion. The bitcoin spot market has also grown to trade roughly $1.5 billion in notional value each day.