Chicago Mercantile Exchange (CME Group) finally debuted its Bitcoin derivatives products yesterday Sunday 17, causing a stir in the trading scenes and boosting trading volumes. CME’s products are larger in size than CBOE’s with one contract being 5 Bitcoins.
The futures opened at $20,650, rose slightly and then fell to $18,760 about four hours about four hours later. They are now above $19,500. In comparison, CBOE’s product rose by 19 percent during their first day of trading on December 12.
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The contracts can be bought in contracts for the nearest two months in the March quarterly cycle (Mar, Jun, Sep, Dec). Alongside the nearest two serial months.
However, there were liquidity issues, probably because there are just a few brokerage services offering brokerage for the contracts. The problem was also eminent in the CBOE case. Interactive Brokers is one of the brokerage firms to provide CME and CBOE futures.
The launch comes after weeks of waiting for many CME supporters, and the launching of similar products by CBOE’s. CME’s contract unit is five bitcoins defines the price of the CME CF Bitcoin Reference Rate (BRR). The price is rely on four cryptocurrency exchanges. Meanwhile CBOE’s unit is equal to one Bitcoin. Since the price is on the actual Bitcoin prices on Gemini exchange market.
CME is also bigger than CBOE — it is world’s biggest derivatives exchange — so was expected to attract more interest in the market. In both markets, the price was trading at $19,200 or higher in the morning UK time compared to bitcoin’s actual spot price of around $19,060..
Futures markets allow traders to bet on future of markets, namely outcome of a commodity, stock, currency, and bitcoin as well. CME requires investors to meet a margin requirement of 43 percent.
The investors take advantage of leverage or borrowing power in these markets.