With the new futures contracts, the traders will deliver the underlying Bitcoins after settlement. The contract differs from the cash-settled futures contracts from CBOE and CME Group and other players.
Coinfloor will launch a futures exchange and the first physically delivered Bitcoin futures contracts next month. The physically delivered contracts will help liquidity providers to hedge their exposure across exchanges. It will launch in April.
Co-founder of the London-based CoinfloorEX said the move will target at serving hedge funds, proprietary trading firms, crypto miners and sophisticated retail investors. They say their futures contract is aimed at more sophisticated investors and professional traders. It will also offer a great opportunity for miners to hedge their production cash-flow.
The participants will pay a flat fee or a simple 0.03% fee on the value of trades, regardless of their monthly volume.
He announced this on Twitter after the interviewing with Reuters at the Futures Industry Association conference in Florida.
The crypto futures contracts will be different from those offers by CBOE and CME Group because they are cash settled. It means there is no actual change of hands of cryptocurrencies. CoinfloorEX will allow traders to deliver the underlying Bitcoin upon settlement.
Some are of the opinion that the cash-settled process is easy to manipulate. Lamb said bad actors can move the index or auction prices on spot exchanges that set the futures prices in their favor.
Coinfloor runs the largest UK-based cryptocurrency spot exchange in London and another spot exchange Gibraltar.
Their futures exchanges will allow traders to use both Bitcoin and fiat as collateral. Their existing exchange will help towards this regard while their reputation is expecting to help bring more liquidity.
However, each contract is equivalent to 0.0001 BTC, and the prices quoted in BTC/USD. The margin requirements are an initial 20%, with a 15% maintenance margin.