Bitcoin options coming to CME Group in early 2020

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Bitcoin options coming to CME Group in early 2020

The Chicago Mercantile Exchange (CME Group) announced that it plans to launch options on its Bitcoin futures contracts the first quarter of 2020, pending regulatory approval.

Tim McCourt, the Global Head of Equity Index and Alternative Investment Products at the CME Group, explained that the decision to add options was based on increasing client demand and robust growth in their Bitcoin futures markets.

“We believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk,” he added.

“These new products are designed to help institutions and professional traders to manage spot market bitcoin exposure, as well as hedge Bitcoin futures positions in a regulated exchange environment.”

Tim McCourt, the Global Head of Equity Index and Alternative Investment Products at the CME Group
Tim McCourt, Global Head of Equity Index and Alternative Investment Products at the CME Group (nasdaq.com)

First movers in institutional crypto services

CME Group and the Chicago Board Options Exchange (CBOE) both launched Bitcoin futures trading within a week of each other in mid-December 2017. 

At the time the whole cryptocurrency market was reaching new highs and Wall Street was beginning to take serious notice.

In December alone, Bitcoin prices surged nearly 75%, from roughly $11,400 to near $20,000.

While CME Group hung in there throughout the ensuing “Crypto Winter”, CBOE decided to stop listing Bitcoin futures contracts in March of this year.

Existing contracts at the time continued to be available to trade until they expired in June.

The firm did not say whether they were planning to offer additional crypto services in the future but the decision to cease Bitcoin futures trading was due to lower than expected volume from institutional investors.

Despite the fact that CME Group was the second to launch its Bitcoin futures contract, it managed to attract the lion’s share of the investors in that market.

Since the launch of its Bitcoin futures contract, CME Group reports that there have been 20 successful futures expiration settlements and more than 3,300 individual accounts traded.

Moreover, 7,000 CME Bitcoin futures contracts have traded on average each day.

With these services, the firm is providing clients with additional tools for precision hedging and trading. 

Institutional-grade crypto platforms 

Other companies are working in order to offer crypto solutions to traditional and institutional investors as well. 

For example, the Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), announced in August 2018 that it would be launching its own cryptocurrency trading platform.

The platform, Bakkt, will go live on September 23 and will offer physically-settled Bitcoin futures to investors.

The platform has been accepting Bitcoin deposits since September 6.

Fidelity Investments is also currently working on a cryptocurrency trading platform that will focus on institutional investors, rather than on retail clients. 

Many within the crypto community view these new institutional trading platforms as a positive step for the cryptocurrency market.

They argue that regulated platforms like Bakkt, Fidelity, and CME Group will help build trust with institutional investors who were previously hesitant to invest in cryptocurrency.