Bitcoin Futures Launch on Chicago Mercantile Exchange (CME)

Traders work in trading floor of the CME Group's Chicago Board of Trade in Chicago

Bitcoin CME Group (CME) futures regained some ground early Monday, after the cryptocurrency's debut on the world's largest futures exchange late Sunday, putting them near levels seen on Cboe Global Markets (CBOE) and the spot market. CBOE conversely had quite a price disparity of around 13% when their futures were launched last Sunday.

Cboe's bitcoin futures contract had a relatively smooth first week of trading, although volume was on the light side.

The contracts were priced only 2% higher than the actual Bitcoin price, which made trading them more effective than CBOE's, which were as much as 13% higher than the BTC price.

- The CME join the CBOE in offering Bitcoin futures, providing increased liquidity.

The reference price, from which price limits are set, is $19,600 for the February contract, $19,700 for March and $19,900 for June, according to CME.

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Bitcoin futures are derived from the underlying value of Bitcoin, and allow traders to bet on what Bitcoin will be worth at a specified future date. It was priced at $18,336 as CME's contract fetched $18,610 at 8:19 p.m. JB Mackenzie, . the managing director of futures trading at TD Ameritrade said: "We look at the volume, the open interest and the spreads, and we want to make sure that all those conditions are maturing properly".

Bitcoin was set up in 2008 by an individual or group calling itself Satoshi Nakamoto, and was the first digital currency to successfully use cryptography to keep transactions secure and hidden, making traditional financial regulation hard if not impossible. CME is a much larger exchange, so many expect it to have a bigger impact on the markets and the overall recognition and legitimization of Bitcoin and its brethren. The contracts, which settle in dollars and trade on regulated exchanges, can be bought by institutional investors that are prohibited from buying bitcoin directly on largely unregulated exchanges. With Nasdaq and Wall Street's Cantor Fitzgerald looking to launch Bitcoin-based products in 2018 long may the crypto mania continue. So in notional terms, 5125 Bitcoins traded at the CME today, compared to 3751 at the CBOE.

The general sentiment in the market remains one of caution and that has been reflected in margin requirements for the contracts. The margin for an S&P 500 futures contract, by contrast, is 5 per cent, analysts said.

The margin requirement at CME is 35 per cent, while at Cboe, it is 40 per cent, reflecting bitcoin's volatility.

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