CBOE Puts 44% Margin on Bitcoin Futures
- Extra safety net put up under an asset both volatile and only partially regulated.
CBOE is releasing its new Bitcoin futures contracts today, a week before rival CME Group does the same. The release of Bitcoin contracts on two major American exchanges is a major sign of mainstream acceptance that has been at least partly responsible for the rapidly rising value of the coin this year.
However the same instability of price that makes the asset so attractive has also led to anxiety in the market. For this reason, CBOE is raising margin requirements from 33% to 44%, according to Bitcoinist.
The safeguards include demanding at least 33% cash up front for each bet, and enforced trading breaks to be triggered if (when) the price of Bitcoin moves by more than 10% in a day, according to Barron's.
This seems sensible - only this weekend, the price of one bitcoin surpassed USD 18,000, and exchanges struggled to cope with demand for the coin. Suspicions of market manipulation abound.
Criticism
The Futures Industry association has criticised CBOE and CME Group for lauching the contracts without adequate research. According to Bloomberg, FIA member firms have reservations about Bitcoin contracts due to price instability:
“We remain apprehensive with the lack of transparency and Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term of the underlying reference products on which these futures contracts are based and whether exchanges have the proper oversight to ensure the reference products are not susceptible to manipulation, fraud, and operational risk.”
The Commodity Futures Trading Commission last week urged all related parties to put closely observe the behaviour of these new contracts, so as to avoid market manipulation.
A statement from the regulator said that "market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority... investors should be aware of the potentially high level of Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term and risk in trading these contracts.”
CBOE signed an agreement with Bitcoin exchange Gemini and announced the launch of Bitcoin futures in August of this year. Since then, Bitcoin has risen in value from USD 4,000 to just over USD 13,000 (at the time of writing).
Last month, CBOE CFA Russel Rhoads candidly stated "I don't know" regarding the issue of Bitcoin futures pricing: "I’ve heard arguments for the futures trading at both a premium and a discount to the spot price, personally I think the best strategy is to see what the market tells us when bitcoin futures are available for trading."
CBOE is releasing its new Bitcoin futures contracts today, a week before rival CME Group does the same. The release of Bitcoin contracts on two major American exchanges is a major sign of mainstream acceptance that has been at least partly responsible for the rapidly rising value of the coin this year.
However the same instability of price that makes the asset so attractive has also led to anxiety in the market. For this reason, CBOE is raising margin requirements from 33% to 44%, according to Bitcoinist.
The safeguards include demanding at least 33% cash up front for each bet, and enforced trading breaks to be triggered if (when) the price of Bitcoin moves by more than 10% in a day, according to Barron's.
This seems sensible - only this weekend, the price of one bitcoin surpassed USD 18,000, and exchanges struggled to cope with demand for the coin. Suspicions of market manipulation abound.
Criticism
The Futures Industry association has criticised CBOE and CME Group for lauching the contracts without adequate research. According to Bloomberg, FIA member firms have reservations about Bitcoin contracts due to price instability:
“We remain apprehensive with the lack of transparency and Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term of the underlying reference products on which these futures contracts are based and whether exchanges have the proper oversight to ensure the reference products are not susceptible to manipulation, fraud, and operational risk.”
The Commodity Futures Trading Commission last week urged all related parties to put closely observe the behaviour of these new contracts, so as to avoid market manipulation.
A statement from the regulator said that "market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority... investors should be aware of the potentially high level of Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term and risk in trading these contracts.”
CBOE signed an agreement with Bitcoin exchange Gemini and announced the launch of Bitcoin futures in August of this year. Since then, Bitcoin has risen in value from USD 4,000 to just over USD 13,000 (at the time of writing).
Last month, CBOE CFA Russel Rhoads candidly stated "I don't know" regarding the issue of Bitcoin futures pricing: "I’ve heard arguments for the futures trading at both a premium and a discount to the spot price, personally I think the best strategy is to see what the market tells us when bitcoin futures are available for trading."