CME head says bitcoin futures will consider the coin's wild volatility and attract young people

  • Terry Duffy, the head of exchange giant CME, told the Financial Times that the exchange’s bitcoin futures product will take into consideration bitcoin’s wild price swings.
  • Duffy said the product is a “client-acquisition play” that will attract young people to the futures market.
  • The exchange is preparing to launch a bitcoin futures product by the second week of December.

Terry Duffy, the head of exchange giant CME, is defending a new bitcoin futures product the firm is preparing to launch by the end of the year.

The exchange operator told the Financial Times that the new product, which will allow traders to bet on the future price of the cryptocurrency, will take into consideration the extreme price swings of bitcoin.

“Listen, it’s no mystery, this is a different product,” Duffy told the FT. “We want to get out something that’s safe.”

As such, the product will subscribe to two mandates designed to help dampen its volatility. They are as follows, according to the FT:

  1. Bitcoin futures will not be able to trade 20% below or above the price of settlement the previous day.
  2. Bitcoin futures traders will have to put up approximately 30% collateral in the event they lose the bet.

Thomas Peterffy, the chairman of Interactive Brokers, the largest electronic brokerage firm in the US took out a full page ad in The Wall Street Journal Wednesday to warn regulators about the dangers bitcoin futures could present to traditional capital markets.

Peterffy said bitcoin’s unbridled volatility could have a dangerous impact on other futures products trading on the market. He also said CME’s plan to margin bitcoin futures — require traders to put up that high collateral — wouldn’t work.

“Margining such a product in a reasonable manner is impossible,” Mr Peterffy said.

“A large cryptocurrency price move that destabilizes members that clear cryptocurrencies will destabilize the clearing organisation itself,” he added.

Duffy said bitcoin futures would bring a new age of traders to the futures markets, which aren’t as sexy as the more popular market for stocks.

“I . . . look at it as a client-acquisition play,” he told the FT. “There’s clients who trade our products, but may not trade as often, who are intrigued by this. There’s a lot of young people that will like this type of marketplace, and they don’t even know what futures are today.”

Read the full report at the FT >>

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