The Futures Exchange CME is Planning to Introduce Bitcoin Trading - Latest Global News

The Futures Exchange CME is Planning to Introduce Bitcoin Trading

Unlock Editor’s Digest for free

CME Group, the world’s largest futures exchange, plans to launch Bitcoin trading to capitalize on rising demand from Wall Street money managers this year to gain exposure to the cryptocurrency sector.

The Chicago-based group has been in discussions with traders looking to buy and sell the cryptocurrency on a regulated marketplace, according to three people with direct knowledge of the discussions.

The plan, which has not yet been finalized, would mark another push by major Wall Street institutions into the digital assets space after the U.S. Securities and Exchange Commission in January approved exchange funds that invest directly in Bitcoin.

CME declined to comment.

The introduction of spot Bitcoin trading on the CME, where Bitcoin futures trading already takes place, would make it easier for investors to place so-called basis trades. Basis trading is a common strategy among professional Bitcoin traders and a staple of the U.S. Treasury market. The idea is to borrow money to sell futures while buying the underlying asset, and make profits from the small gap between the two. The majority of Treasury basis trading occurs at CME locations.

Some of the world’s largest financial institutions have turned from Bitcoin skeptics to advocates, driven by its strong recovery from a 2022 low to a record high earlier this year, as well as growing investor acceptance as a tradable asset and a crackdown by regulators is about illegal market activities.

Although the token has lost a fifth of its value since peaking above $73,000 in March, exchange-traded funds linked to the coin have become the fastest-growing ETFs of all time.

Hedge funds, including Bracebridge Capital, and pension funds such as the Wisconsin Investment Board are among major investors that have invested more than $10 billion in assets in vehicles operated by asset managers such as BlackRock, Fidelity and Ark. In March, BlackRock CEO Larry Fink said he was “long-term bullish” on Bitcoin.

CME has been one of the biggest beneficiaries of the wave of renewed institutional interest, overtaking Binance as the world’s largest Bitcoin futures market as traders look to profit from the coin’s volatility.

CME, which primarily targets hedge funds and proprietary traders, has about 26,000 open positions worth about $8.5 billion in its Chicago market, more than double the amount a year ago.

Its potential spot trading business would be conducted through the EBS foreign exchange trading venue in Switzerland, which has extensive regulations governing the trading and storage of crypto assets, the people said.

Major traditional exchange operators have a patchy track record when it comes to trading spot cryptocurrencies. Deutsche Börse opened its own digital assets market this year, but CBOE Global Markets, the CME’s crosstown rival, announced last month that it would close its spot market business, blaming a lack of clear U.S. regulation.

A crypto trading executive questioned whether CME could gain significant market share if its Bitcoin trading business operated in two markets, CME in Chicago and EBS in Switzerland. “I have a hard time imagining how they can take advantage of all the efficiencies available to them,” he said.

He added that the biggest benefit of the CME operation is that major regulated exchanges have become more familiar with the infrastructure for trading digital assets, such as secure storage of coins.

That means exchanges may soon accept crypto-related collateral such as tokenized money market funds to make timely margin calls, he said.

Sharing Is Caring:

Leave a Comment