London-based spread better and trading provider CMC Markets (LSE: CMCX) today became the latest FCA-regulated broker to add a cryptocurrency derivative product to its trading platform, giving its investors the added advantage of tax free profits when trading the digital asset.
CMC Markets’ customers can now trade Bitcoin and Ethereum either as a spread bet or as a contract for difference (CFD), with access to margin and financing, as well as the ability to take both long and short positions. This often requires the brokerage to establish liquidity relationships with multiple exchanges to produce a volume-weighted average price for its instruments.
There has been rapid growth in UK-based CFDs and spread betting providers looking to cash in on the meteoric rise of cryptocurrency – including Admiral Markets, Plus500, Gain Capital’s City Index, and many others.
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The firms likely turned to CFDs as a way of offering cryptocurrency trading due to the difficulty in hedging positions in the real markets which always makes this derivative type a prime alternative to many underlying assets.
However, the FCA cautioned investors over cryptocurrency CFDs in November, labelling them “extremely high-risk, speculative products”.
CMC Markets plans to initially roll out cryptocurrency spread bets and CFDs only to its professional client base, but may expand the offering to its global customers later in the year.
Commenting on the launch, Grant Foley, chief operating and financial officer at CMC Markets, said: “With the cryptocurrency market growing rapidly over the past 12 months, we have received significant interest from our clients for bitcoin and ethereum CFDs. As a result, we have developed a new offering for this unique digital asset class. We recognise that cryptocurrencies can be regarded as a volatile market, so we are initially only offering trading, on an exclusive basis, to our experienced professional client base.”
He added: “We have built our bitcoin and ethereum cryptocurrency offering with our clients in mind. Like all other financial instruments we offer, we always recommend that clients understand the risks and conduct thorough research before trading.”