Cboe Approved: Margined Futures For Bitcoin And Ether
The U.S. Commodity Futures Trading Commission (CFTC) made a significant announcement on Monday, granting approval to Cboe, one of the largest options exchanges in the United States, to introduce margined futures contracts for Bitcoin and Ether. This move comes at a crucial time when some segments of the U.S. crypto industry are relocating overseas due to concerns over regulatory enforcement. John Palmer, the President of Cboe Digital, emphasized that this development signifies progress in an era of uncertainty.
The US CFTC approved an application from Cboe, one of the largest U.S. options exchanges, to offer margined futures contracts for Bitcoin and Ether.
While CME also offer margined futures contracts for crypto assets, Palmer said that Cboe’s new approval can offer spot trading…
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Cboe’s Margined Futures Approval
Palmer stated, “We’re seeing expansion in the U.S. framework, not contraction. This is a really good representation of that hard work across both sides of the fence, both on the Cboe Digital side but also on the regulator side,” highlighting the collaborative efforts between the exchange and regulators.
Futures contracts, a popular tool for institutional investors, have gained traction among retail investors in the crypto space. Cboe Digital previously offered crypto futures contracts but did not allow margin trades. With the introduction of margined contracts, traders are only required to post a fraction of the full price of a Bitcoin or Ether, reducing the upfront investment and potentially yielding higher returns on deployed capital.
What sets Cboe’s approval apart is that it also includes spot trading under the same entity. This unique feature benefits traders, such as market makers, who provide liquidity, and enables greater efficiencies for strategies like basis trading, which seeks price differentials between spot and futures contracts.
CFTC Supports Cboe’s Approach
Cboe’s model stands in contrast to the failed crypto exchange FTX’s proposal for futures contracts with the CFTC. Unlike FTX, which sought to eliminate intermediaries and allow direct margin posting, Cboe requires users to go through futures commission merchants (FCMs) to buy or sell contracts. CFTC Commissioner Christy Goldsmith Romero supported Cboe’s approach, citing the exchange’s extensive experience operating for over 50 years.
Cboe’s approval is a positive development for the U.S. crypto industry, which has witnessed companies like Coinbase and Gemini establishing derivatives exchanges offshore. While these companies are driven by the desire to offer certain types of crypto derivatives contracts, not yet approved domestically, Palmer praised the regulators’ work in the United States. He expressed confidence in collaborating with regulators to responsibly expand the asset class and considered the approval a triumph for the U.S. industry.
Cboe Digital plans to launch its margined futures contracts for Bitcoin and Ether in the second half of 2023, aiming to provide a robust and regulated platform for investors interested in crypto derivatives.
