Cboe Digital will introduce Bitcoin and Ethereum margin futures trading. Will traditional institutions accelerate their entry into the market?
Cboe Digital to Launch Bitcoin and Ethereum Margin Futures Trading Will Traditional Institutions Hasten Their Market Entry?
Author: Nancy, LianGuaiNews
Recently, the Chicago Mercantile Exchange’s Bitcoin futures surpassed Binance, attracting market attention due to the continuous growth in institutional demand. At this moment, Cboe Digital, a subsidiary of the Chicago Board Options Exchange (CBOE), which was the first to launch Bitcoin futures in December 2017, announced plans to launch Bitcoin and Ethereum-based margin futures trading and settlement services on January 11, 2024. It will become the first regulated native cryptocurrency exchange and clearinghouse in the United States, allowing spot and leveraged derivative trading on the same platform.
Cboe Digital is the only registered cryptocurrency exchange in the United States, offering spot trading for BTC, ETH, BCH, LTC, and USDC, mainly targeting professional or institutional participants. In addition, the company also has a clearinghouse. Cboe Digital was formerly known as ErisX, a regulated cryptocurrency derivatives exchange and clearinghouse, which was acquired by CBOE for $460 million in May 2022 and subsequently renamed.
In fact, CBOE, the parent company of Cboe Digital, has been laying the groundwork for the cryptocurrency derivatives market for several years. During the Bitcoin bull market in December 2017, CBOE was the first to launch Bitcoin futures trading with the code “XBT”, and the product triggered circuit breakers multiple times on its first day of listing due to high demand. However, as the price of Bitcoin continued to decline, CBOE announced the closure of Bitcoin futures trading in 2019, marking the end of the first Bitcoin futures product. CBOE explained, “We want to take a fresh look at how to re-enter this area. We do not plan to add XBT futures contracts to our futures market before taking further action, but we do not rule out the possibility of issuing derivative products for other cryptocurrencies.”
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Cboe Digital is the “weapon” for CBOE to return to the cryptocurrency and derivatives markets. It is supported by institutions such as DRW, Fidelity Digital Assets, Galaxy Digital, Interactive Brokers, NYDIG, LianGuaixos, and Robinhood. In June this year, Cboe Digital obtained approval from the U.S. Commodity Futures Trading Commission (CFTC) and will offer physically and cash-settled margin contracts starting in the second half of the year. Now it has officially launched its first related product.
According to Cboe Digital, compared to the no-margin futures model, the upcoming Bitcoin and Ethereum margin futures trading will provide higher capital efficiency and support both spot and derivative trading, offering investors additional opportunities to improve their capital and operational efficiency. In addition, to enhance transparency, Cboe Digital plans to disclose daily margin requirements and provide standardized risk parameter files.
This product aims to complement CBOE Digital’s existing suite of cryptocurrency products and incentivize broader institutional participation by offering familiar trading mechanisms. However, at this stage, Cboe Digital currently only supports cash settlement for clearing, and products with physical settlement still require regulatory approval.
Currently, Cboe Digital’s margin futures products have gained support from multiple cryptocurrency and traditional financial institutions, including Cumberland DRW, Jump Trading Group, B2C2, BlockFills, CQG, Marex, StoneX Financial, Talos, Trading Technologies, and Wedbush, among others.
“Futures have always been an important hedging tool in traditional financial markets, and this tool is now expanding to the cryptocurrency market, providing margin trading capabilities for our clients. We believe derivatives will bring additional liquidity and hedging opportunities for cryptocurrencies, representing the next key phase of growth in this market,” said John LianGuailmer, President of Cboe Digital.
Cumberland DRW’s Global Head, Chris Zuehlke, stated, “The services provided by Cboe Digital in offering a secure entry to regulated futures markets are crucial for the maturation and wider institutional participation in this emerging asset class.”
Bob Fitzsimmons, Executive Vice President of Wedbush Securities, believes that Cboe Digital has played an important role in helping to establish transparent and well-regulated cryptocurrency spot and derivative markets.
In summary, the launch of margin futures trading by Cboe Digital signifies an important step towards the normalization of cryptocurrency assets in the market and will accelerate their integration into mainstream finance.