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CME Group Plans to Regulate Futures’ Market Against Volatility

Avatar Rick Delafont 2 years ago

The CME Group has announced their intention to apply limits to their Bitcoin Futures’ trading range. According to their website, the platform is expected to launch in December, pending a review by regulators. The announcement made by the group on Tuesday seeks to safeguard against some of the volatility associated with the cryptocurrency space.

The aim is to incorporate a price fluctuation limit at 7 and 13% below and above the previous session’s settlement price. Trading outside of 20% +/- the prior day’s price will also be excluded. Complete details are available at CME’s website. These ranges are like those provided by regulators of the US stock index futures’ market. However, it’s expected that they’ll be more beneficial in a fresh and emerging market like Bitcoin since it’s plagued with far more erratic price fluctuations than traditional stocks.

It’s hoped that the measures announced Tuesday should help safeguard investors in the space against the worst of the value swings which Bitcoin and other cryptos have become known for. Being a market still striving for maturity, either positive or negative news can send the price of individual digital currencies rapidly up or down. It’s not at all uncommon to see Bitcoin move 20% in either direction during a single day.

Such swings can make or break traders depending on their choice of transactions and their timing. CME are hoping that the restrictions placed on their futures’ market will encourage more clients to enter the market. This should encourage higher levels of investment which will in turn mean greater liquidity and therefore less volatility in the long run as the market matures.

Despite the announcements, the futures’ market has not been given the full go ahead from regulators yet. However, CEO of CME Terry Duffy said on CNBC segment “Closing Bell” on Tuesday that he’s confident of an approval from the US Commodity Futures Trading Commission. Meanwhile, another Bitcoin futures’ market is being planned by the largest US options options exchange – the Chicago Board Options Exchange (Cboe).

It’s widely presumed in the industry that once futures’ markets are accepted and become commonplace, it’s only a matter of time before an exchange traded fund gets the go ahead. According to StreetAccount, Cboe’s president and chief operating officer, Chris Concannon said:

And over time, we do envision ETFs coming to market once the regulated futures market is built and liquid.

With renewed talk of ETFs, two futures’ options emerging, and over 120 crypto hedge funds available to investors, it seems that all that institutional money that Bitcoin’s advocates have long talked about could be starting to pour into the space.

Image: ShutterStock
Rick Delafont

Based in Europe, Rick has written about the cryptocurrency industry since 2016. He was first drawn to Bitcoin as a means of payment but quickly became fascinated by its wider potential implications. His interests lie in the...

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