Second US Stock Exchange Launches Bitcoin-based Trading

Giant CME exchange launches bitcoin futures to muted response

Bitcoin futures started trading Sunday night at CME Group Inc.'s venue, a week after Chicago rival Cboe Global Markets Inc. introduced similar derivatives on the volatile cryptocurrency.

Trading volume for the CME futures has been light, with less than 650 contracts changing hands in the first eight hours of trading, compared with nearly 2,500 over the same time frame during Cboe's debut.

Cboe futures were at $19,010, up from $18,105 Friday.

The price of one bitcoin (BTC) reached a new all-time high of $19,783.06 early Sunday before dropping back below $19,500, according to Coindesk's price index. Its most-active contract changed hands 221 times in the first hour versus 570 during Cboe's debut. But two days later Cboe Global Markets said it was launching its own futures contract on December 10, a week before CME. It was priced at $18,336 as CME's contract fetched $18,610 at 8:19 p.m.

Bitcoin surged toward $20,000 in the minutes before trading began at CME, before paring gains.

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Bitcoin was set up in 2008 by an individual or group calling itself Satoshi Nakamoto, and was the first digital currency to successfully use cryptography to keep transactions secure and hidden, making traditional financial regulation hard if not impossible.

A spokesperson representing the German exchange told the finance publication WirtschaftsWoche that they "are thinking about futures that private and institutional investors can use to hedge existing investments in bitcoin or bet on falling cryptocurrency prices".

The futures launch came as French finance minister Bruno Le Maire indicated that he would push for regulation of bitcoin.

Based on the CME CF Bitcoin Reference Rate (BRR), the new CME contract is cash-settled in U.S. dollars.

The general sentiment in the market remains one of caution and that has been reflected in margin requirements for the contracts. The margin for an S&P 500 futures contract, by contrast, is just 5 per cent, analysts said. With futures, "you don't hold the physical bitcoin, which solves custody issues and counterparty risks with these less-regulated exchanges". The bid-ask at the CME at both ranges from $20-$40.

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