CME Raises Margin Requirements; CBOE Launches BTC Futures Benchmark Index

More than 5,000 BTC futures contracts have traded on CBOE; CME will launch BTC futures on Sunday.

Just five years ago, Bitcoin’s market cap was less than $1 billion; now, it reaches nearly $300 billion. The cryptocurrency market cap as a whole exceeded half a trillion dollars just within the last week, and the hype only seems to grow. One of the factors that has significantly contributed to the increasing valuation of cryptocurrency and Bitcoin in particular is the launch of Bitcoin futures tradings on two major exchanges, CME and CBOE.

Although CME was the first exchange to announce that it would be trading Bitcoin futures, it will be the second exchange to actually launch the product on December 17. The first Bitcoin futures began trading on rival exchange CBOE on Sunday, December 10. With excitement in the air, the two exchanges are working to appropriately regulate BTC futures trading as well as offer tools that could make the practice more profitable.

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CME: Higher Margins to Reduce Volatility Risk

CME has announced a rise in margin requirements for the Bitcoin futures trading options that it will launch early next week. According to Bloomberg, the decision was made as a safeguard against Bitcoin’s volatility. (Margin requirements are the amounts of funding that must be put up as collateral to assure other entities involved in a trade that potential losses can be covered.)

CME’s initial margin requirements were set at 35 percent; they are now at 47 percent. Additionally, CME will require a 43 percent maintenance margin, which means that 43 percent of a contract’s value must be maintained throughout rising and falling levels of valuation.

Since launch, rival exchange CBOE’s margin requirement has been 44 percent of the last price paid for the product on any given day, also known as the daily settlement price. More than 5,000 Bitcoin futures contracts (denoted by the ticker symbol ‘XBT’) have been traded on CBOE since December 10th.

CBOE’s BTX Futures Benchmark Index Launches Today

In addition to Bitcoin futures contracts themselves, CBOE has announced the launch of the ‘CBOE Gemini Bitcoin Futures Index’ (‘XBTX’). XBTX will act as a strategy performance benchmark index, a tool that “is intended to provide an objective, rules-based approach to describing a particular investment outcome”, according to CBOE. The exchange will begin circulating XBTX values through quote vendors today (December 14) after 3:15pm Central Time.

XBTX will act as a sort of test to “simulate a hypothetical long exposure to Bitcoin through CFTC [Commodity Futures Trading Commission]-regulated futures contracts traded on CFE [CBOE Futures Exchange]” that are settled to Bitcoin’s auction price on the Gemini Exchange. The BTC Futures Index will join more than thirty other strategy performance benchmark indexes that CBOE provides.

BTC Continues Upward Movement Post-CBOE, Pre-CME Launches

Although only a few days have passed, BTC futures trading seems to be going relatively copacetically on CBOE. Despite some technical issues following shortly after the official launch, CBOE’s director of product development Michael Mollet told the Washington Post that “the trading has been orderly. We hit a couple of our circuit-breaker halts, but those were due to price movement in futures and not due to any systems issues. We halted like our rules said we would and opened back up.”

CoinDesk reported that “the price of Bitcoin jumped over $1,000 in minutes” following CBOE’s launch. We can only hope for more of the same in anticipation of CME’s inaugural Bitcoin futures trading day this coming Sunday.

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