World's First Bitcoin Futures to Start Trading

Cboe announces bitcoin futures to start trading Sunday

CME Group's Bitcoin futures will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the USA dollar price of bitcoin. Bitcoin itself is now bought and sold on platforms that are virtually unregulated, which has made some money managers uncomfortable with the market even as prices soar.

The move is clearly meant to steal the thunder from fellow Chicago derivatives exchange CME, which announced on Friday that it will list bitcoin futures on December 18.

Bitcoin's rapid rise from less than US$800 in December past year to more than US$11,000 this week on Coindesk has stoked fears that it is a pricing bubble that could leave recent investors worse-off. At 19:54 UTC on Monday, bitcoin was trading at $11,237.19, unchanged in the last 24 hours.

Bitcoin has taken another step toward the financial mainstream, after a USA regulator said it would let two traditional exchanges begin trading in Bitcoin-related financial contracts.

According to the official release, CME Group has self-certified the initial listing of its Bitcoin futures contract, which will be listed on and subject to the rules of CME.

At CBOE, the contract limit is 5,000.

On the other hand, CME plans to use the services of four bitcoin exchanges - Bitstamp, GDAX, itBit and Kraken - to set its Bitcoin Reference Rate (BRR).

Bitcoin derivatives will likely attract more heavyweight investors, which will gradually reduce the cryptocurrency's volatility, as well as increase its liquidity and steady its exchange rate with fiat currencies, said Wang Liren, senior researcher at the China Blockchain Research Alliance. To ensure minimal impact on markets due to bitcoin's price swings, traders will have to pay 33 percent of their trade's price upfront as compared to the 35 percent for CME bitcoin futures trades. The entry of institutional money is also expected to act as a stabilizing mechanism for the cryptocurrency's recent wild price swings.

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