CME Group Sees Increasing Institutional Demand for Bitcoin Contracts

The company has no plans to launch physically-settled Bitcoin futures.

US-based derivatives exchange CME Group revealed that it is recording increasing institutional interest as the launch of its Bitcoin options is looming, Markets Media reported on Thursday.

The Chicago-based exchange is one of the major issuers of Bitcoin futures in the United States market and is now planning to introduce options on Bitcoin futures contracts in the first quarter of next year. The proposal is still pending for regulatory review.

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The exchange is currently testing the options instrument, which is based on CME Group’s existing technology, matching engine, and clearing mechanisms.

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“Since we launched bitcoin futures in December 2017, the number one demand from customers has been for options on our futures,” Tim McCourt, global head of equity index and alternative investment products at CME, told the media house.

He also detailed that the institutional players interested in the digital asset instruments include hedge funds, CTAs, and asset managers.

“The institutional interest in bitcoin is growing but they need time to become familiar with the market and get approval to use new products,” McCourt added.

No plans for physically-settled Bitcoin contracts

Addressing the hype over physically-settled Bitcoin futures contracts, he said that CME Group has no plans to launch such contracts.

Unlike CME’s cash-settled Bitcoin futures, physically-settled instruments deliver the number of Bitcoins associated with the contract, minimizing the settlement risks.

Bakkt became the latest player in the United States market to first introduce such physically-settled futures contracts. However, the demand for such contracts remains much lower than the expected trading volume.

“Building a new futures market is hard and we have been hugely successful with $1.3bn (€1.19bn) of bitcoin futures traded in May,” he added. “We have already delivered on milestones and the introduction of options will help develop the ecosystem.”

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