Cboe Digital to Offer Margined Bitcoin and Ethereum Futures in January

Cboe Digital, the digital asset arm of the Chicago Board Options Exchange (CBOE), has announced plans to launch trading and clearing in margin futures on Bitcoin and Ethereum, starting from January 11, 2024. This will make Cboe Digital the first U.S. regulated crypto native exchange and clearinghouse to enable both spot and leveraged derivatives trading on a single platform.

Margin futures are a type of derivative contract that allow traders to enter positions by posting only a portion of the total value of the underlying asset, rather than the full amount. This provides greater capital efficiency and leverage for traders, as they can amplify their exposure to price movements with less upfront collateral.

Cboe Digital to Offer Margined Bitcoin and Ethereum Futures in January
Cboe Digital to Offer Margined Bitcoin and Ethereum Futures in January

Margin futures are widely used in traditional financial markets, such as stocks, commodities, and currencies, as they offer valuable hedging and speculation opportunities for investors. However, in the crypto space, margin futures are mostly offered by unregulated or offshore platforms, which pose significant risks and challenges for traders, such as counterparty risk, liquidity risk, regulatory uncertainty, and operational risk.

By launching margin futures on Bitcoin and Ethereum, Cboe Digital aims to bring trust, transparency, and responsible innovation to the crypto spot and derivatives markets, and to bridge the gap between crypto and traditional finance. Cboe Digital will leverage its experience and expertise in operating regulated markets, as well as its integrated exchange-clearinghouse model, to offer a secure, compliant, and reliable platform for crypto traders.

How will Cboe Digital’s margin futures work?

Cboe Digital will initially offer financially settled margined contracts on Bitcoin and Ethereum, meaning that traders will not receive or deliver the actual crypto assets at the expiration of the contract, but rather settle the difference in cash. Cboe Digital plans to expand its product suite to include physically delivered products at a later date, subject to regulatory approvals.

Cboe Digital’s margin futures will have a contract size of one Bitcoin or 10 Ether, and will trade in U.S. dollars. The contracts will have monthly expirations, and will be cash-settled on the last Friday of each month, based on the Cboe CF Bitcoin Reference Rate or the Cboe CF Ether-Dollar Reference Rate, which are calculated using prices from multiple spot exchanges.

Cboe Digital will use a risk-based margin methodology to determine the initial and maintenance margin requirements for each contract, which will vary depending on the volatility and liquidity of the underlying asset. Cboe Digital will also employ a range of risk management tools, such as price limits, margin calls, and auto-liquidation, to protect the integrity and stability of the market.

Who will support Cboe Digital’s margin futures launch?

Cboe Digital’s margin futures launch will be backed by 11 leading firms across the cryptocurrency and traditional financial marketplace, including B2C2, BlockFills, CQG, Cumberland DRW, Jump Trading Group, Marex, StoneX Financial, Talos, tastytrade, Trading Technologies, and Wedbush. These firms will provide liquidity, market making, trading, clearing, and technology services to Cboe Digital and its customers.

John Palmer, President of Cboe Digital, said: “Our upcoming launch of margin futures represents a significant milestone for Cboe Digital, and we are grateful to have the support of such a remarkable group of industry partners who share our commitment to building trusted and transparent crypto markets. Futures have long served as valuable hedging instruments in the traditional financial markets, and we couldn’t be more excited to extend access to this tool further into the digital assets markets and offer margined trading for our customers. We believe derivatives will foster additional liquidity and hedging opportunities in crypto and represent the next critical step in this market’s continued growth.”

Leave a Reply

Your email address will not be published. Required fields are marked *