Bitcoin futures

A Hong Kong finance regulator has published a new circular on bitcoin futures and other cryptocurrency-related investment products. It was notably released on the first full day bitcoin futures trading of the futures contract launched by Chicago-based CBOE, which officially went live late Sunday. Bitcoin Futures have been or will soon be launched by certain well-established futures and commodities exchanges in the United States which are regulated by the U.

Hong Kong investors may be able to trade in bitcoin futures through an intermediary which is a member of these exchanges. The industry is reminded that a party is required to have an appropriate licence with the SFC if it provides any other business services relating to bitcoin futures. The SFC also stressed that other forms of cryptocurrency-related investment products are available to investors in the country including cryptocurrency options. Failure to obtain a license to offer such services “may be committing a criminal offence under the SFO,” according to the circular. SFC warned investors to check whether bitcoin futures products from unregulated cryptocurrency exchanges constitute “futures contracts” or “securities” under the SFO. It also reminded investors about the potential risks in trading cryptocurrencies including insufficient liquidity and price volatility.

CME Group, the world’s largest derivatives exchange operator, has begun trading bitcoin futures. 20,650 in a session that extends into Monday. 19,500 reference price set by the exchange for the January contract. 19,900 for June, according to CME. The launch of bitcoin futures is viewed as a major step in the digital currency’s path toward legitimacy that should ease the entry of big institutional investors.

We saw a nice open on light volume, but pretty uneventful so far. I do think we could certainly pick up in volume as Asia begins to open. Spencer Bogart, partner at Blockchain Capital LLC, said shortly after trading began on Sunday. Volume on CME was recently at 287 contracts.

On its debut last Sunday, the Cboe traded nearly 4,000 contracts during the full session. 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 difficult if not impossible. Some investors believe the CME bitcoin futures could attract more institutional demand because the final settlement price is culled from multiple exchanges. The Cboe futures contract is based on a closing auction price of bitcoin from the Gemini exchange, which is owned and operated by virtual currency entrepreneurs Cameron and Tyler Winklevoss. The general sentiment in the market remains one of caution and that has been reflected in margin requirements for the contracts. In the futures market, margin refers to the initial deposit made into an account in order to enter into a contract. One futures trader said the average margin for brokers or intermediaries on bitcoin contracts was roughly twice the exchange margins.