News > FinTech

CME Capital Launching Bitcoin Futures Contract By End of the Year

By NexChange

CME Capital announced on Tuesday that will launch bitcoin futures by the end of the year, subject to regulatory approvals.

The futures contract will be cash-settled, according to the Chicag0-based exchange operator, and 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.”

Terry Duffy, CME Group chairman and chief executive officer, said in a statement that the launch of the futures contract is due to “increasing client interest in the evolving cryptocurrency markets.” CME Group has calculated and published the BRR along with  Crypto Facilities Ltd. since last November, aggregating “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 built around the IOSCO Principles for Financial Benchmarks, according to the CME Group’s announcement.

“As the world’s largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities,” Duffy said in a statement.

The Wall Street Journal notes that the launch of bitcoin futures could go a long way toward pushing bitcoin further into the mainstream, as the popular cryptocurrency joins oil and gold in the futures market.

Introducing a U.S. futures contract based on bitcoin would allow a way for Wall Street banks and trading firms to hedge against price swings in the highly volatile digital currency. It could also provide retail investors with an easier way to trade bitcoin, adding it to the ranks of assets like gold and oil that trade via futures contracts.

“It is a legitimization of bitcoin as an asset class,” said Daniel Masters, chairman of the Global Advisors group of companies, which runs a bitcoin hedge fund and exchange-traded notes linked to digital currencies.

However, CME Capital will not be without competition, as CBOE Holdings Inc., also based in Chicago, announced in August that it was teaming up with Cameron and Tyler Winklevoss to also launch a bitcoin futures by the end of the 2017.

Photo: Getty iStock

Subscribe to our Newsletter

Be one of the first to experience the future of financial services