— CMEGroup (@CMEGroup) October 31, 2017
The future will be cash-settled and will be based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. Bitcoin futures will be listed on and subject to the rules of CME.
“Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract,” said Terry Duffy, CME Group Chairman and Chief Executive Officer. “As the world’s largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities.”
It worths mentioning that last month CME Group President Bryan Durkin told reporters he did not think the company would consider in the nearest future introduction of a bitcoin futures contract. But it looks like demand for it was too strong to ignore.
For the past year of partnership between CME Group and Crypto Facilities Ltd. the BRR have been calculated and published, “aggregating the trade flow of major bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time” the official press release says.
The BRR is based on the IOSCO Principles for Financial Benchmarks. Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR.
“We are excited to work with CME Group on this product and see the BRR used as the settlement mechanism of this important product,” said Dr.Timo Schlaefer, CEO of Crypto Facilities. “The BRR has proven to reliably and transparently reflect global bitcoin-dollar trading and has become the price reference of choice for financial institutions, trading firms and data providers worldwide.”
The news about bitcoin futures launched has immediate response by the bitcoin price, which jumped to a record, rising to $6,367 at the moment of writing, according to CoinMarketCap’s Index.
Last November CME Group put forward an initiative to publish Bitcoin prices as both a real time spot price index and a reference rate by traders, investors, and the public. That was the first time that a large asset exchange implements such a measure. Hopefully, the initiative will contribute to bitcoin legitimization as a financial asset.
“Digital currency has long-needed participation from a company such as CME Group to elevate the asset class to a new level. We are thrilled to be a member of the oversight committee,” said Michael Moro, CEO of Genesis Global Trading.
Two years ago CME Group partnered with some other financial institutions such as the London Stock Exchange, Euroclear, Societe Generale, Swiss bank UBS, and clearing house LCH.Clearnet, to establish a body that will investigate the potential applications of the blockchain in the payments industry. The aim of the team called ‘Post Trade Distributed Ledger Working Group’ was to explore how the technology may transform the way of conducting transactions.