Bitcoin futures trading is coming to the Chicago Mercantile Exchange and the CBOE Futures Exchange, the first traditional exchanges to wade into the cryptocurrency market, after a federal regulator said it had discussions with the exchanges to protect customers.
The decision by the Commodity Futures Trading Commission means investors will be able to bet on changes to bitcoin prices, without buying bitcoin. Bitcoin prices have surged more than tenfold this year and earlier this week moved past $11,000 before dropping.
The Merc said it would launch its futures contract Dec. 18.
The CFTC said it had “rigorous” discussions with the Merc during the past six months, with CBOE for the past four months and phone calls with Cantor Exchange, which also will begin trading bitcoin binary options. The commission said it had put in place certain safeguards.
Still, its announcement came with a cautionary note about the largely unregulated currency.
“Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past,” CFTC Chairman J. Christopher Giancarlo said in a statement. “As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets.”
“Market participants should take note that the relatively nascent underlying cash markets and exchanges for bitcoin remain largely unregulated markets over which the CFTC has limited statutory authority,” Giancarlo said. “There are concerns about the price volatility and trading practices of participants in these markets. We expect that the futures exchanges, through information sharing agreements, will be monitoring the trading activity on the relevant cash platforms for potential impacts on the futures contracts’ price discovery process, including potential market manipulation and market dislocations due to flash rallies and crashes and trading outages. Nevertheless, investors should be aware of the potentially high level of volatility and risk in trading these contracts.”