Washington, D.C. – The Commodity Futures Trading Commission (CFTC) announced today that the Chicago Mercantile Exchange Inc. (CME), the CBOE Futures Exchange (CFE), and Cantor Exchange (Cantor) have self-certified new contracts for Bitcoin futures products and binary options. The move comes after extensive discussions between the CFTC and the exchanges regarding customer protection and market orderliness.
CFTC Chairman J. Christopher Giancarlo emphasized the unique nature of Bitcoin as a virtual currency, stating it’s unlike any commodity the Commission has previously dealt with. The exchanges agreed to significant enhancements to contract design, settlement procedures, and margining – particularly CME – at the request of CFTC staff. A key component of the agreement involves increased information sharing between the futures exchanges and the underlying cash Bitcoin exchanges to facilitate surveillance.
The CFTC expressed concerns about the volatility and largely unregulated nature of the cash Bitcoin markets, over which it has limited statutory authority. The exchanges will be expected to monitor cash platform activity for potential market manipulation, flash crashes, and trading outages that could impact futures contract price discovery. Investors were cautioned to be aware of the high volatility and risks associated with these contracts.
Commission staff engaged in rigorous negotiations with CME for six weeks, CFE for four months, and held numerous calls with Cantor. The CFTC, CME, CFE, and Cantor will coordinate surveillance activities and share information. The Commission will continuously assess the contracts and settlement processes and work with the exchanges to implement further changes if needed.
Following the launch of these contracts, CFTC staff will actively monitor market size, positions, open interest, margin requirements, and conduct stress tests. Reviews of designated contract markets, derivatives clearing organizations, clearing firms, and individual traders will also be conducted. The CFTC will collaborate closely with the National Futures Association (NFA), which has already issued an investor advisory to its members regarding virtual currency futures products and will monitor member firm trading activity.
The CFTC retains the authority to require adjustments to margin levels held by derivatives clearing organizations if deemed inadequate to mitigate risk.
Source: CFTC.gov
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