Margin Futures for Bitcoin & Ether Approved by US Commodity Futures Trading Commission
The US Commodity Futures Trading Commission has approved Cboe, one of the largest US options exchanges’ application to offer margin futures contracts for bitcoin and ether. This development is described as a step forward at a time of uncertainty by Cboe Digital President John Palmer. Although Cboe previously made crypto futures contracts available, it did not allow margin trading, which is growing in popularity among retail investors. While other platforms, including the CME group, have offered crypto futures contracts with margin trading, Palmer said that Cboe’s new admission is unique as Cboe also offers spot trading under the same entity, allowing for greater efficiencies for other strategies such as basic trading, where users look for price differences between spot and look for futures contracts.
Cboe’s Model Stands in Contrast to FTX’s Proposal
FTX, the failed crypto-exchange, had applied to the CFTC for approval of a different approach to futures contracts where customers could transfer margin directly to FTX without a broker, eliminating intermediaries. However, Cboe’s model stood in stark contrast to FTX’s proposal, fully embracing intermediaries. According to Palmer, this traditional model has proven to stand the test of time, and as a result, CFTC Commissioner Christy Goldsmith Romero cited Cboe’s more than 50 years of experience operating exchanges, agreeing with the Cboe approach.
The Future of Crypto in the US
Coinbase and Gemini move abroad to open derivatives exchanges, as perpetuals remain illegal domestically. Although regulators in the US have been praised for responsible growth regardless of regulatory clarity and irrespective of who the regulator is, Cboe’s approval is seen as a win for the US industry. Cboe Digital plans to launch its margin futures contracts for Bitcoin and Ether in the second half of 2023.
Additional Piece
Margin Futures Analysis: A Boon for the Crypto Analytics Industry
The US Commodity Futures Trading Commission’s approval of margin futures contracts for Bitcoin and Ether marks a revolutionary milestone for the cryptocurrency industry; particularly for analytics firms. With the seed infrastructure in place, these firms can offer more insights, intelligence and even personalized investment packages for investors. What’s more, the reduced upfront deposit brings in more investors who then gain access to professional analytics that can optimize their decision-making prowess.
For those interested in the crypto market, analytics firms provide a more comprehensive view of the market, identifying emerging trends before they hit the mainstream, indicative of rising future adoption. Imagine how helpful it would be to predict future trends and position oneself ahead of the curve for massive profits. With the advancements brought about by margin futures, investors now have access to data-driven insights that can significantly affect their investment options, positioning and profitability.
Margin futures are the collateral requirements necessary to support a market position and offer leveraged exposure to an underlying security. Ultimately, futures can be used to hedge existing exposures, as with traditional markets. The purpose of a margin for a futures contract is to provide contractual obligations to buy or sell a financial asset in the future to investors with smaller initial outlays than direct purchases. In other words, an investor can enter into a futures contract with a smaller fraction of the full amount.
With analytics firms identifying price discrepancies between spot and futures contracts, investors can take advantage of these differences and gain potentially higher tangible returns with less initial investment. Moreover, with analytics firms offering unique insights, investors can avoid the market speculation inherent in other industries.
As we look ahead, these developments’ implications and acceptance are a sign that the cryptocurrency industry is maturing and corroborate significant mainstream endorsement. Investors stand to gain significant value while financial experts gain the trust necessary to advance this trend further.
Summary:
Cboe has received approval from the Commodity Futures Trading Commission (CFTC) to offer margin futures contracts for Bitcoin and Ether. Previously, Cboe made crypto futures contracts available but did not allow margin trading. This change is one of the most significant milestones for the cryptocurrency industry, and CFTC Commissioner Christy Goldsmith Romero cited Cboe’s 50+ years of experience operating exchanges. Margin futures are emerging as a means for investors to enter the cryptocurrency market with less initial investment, while analytics firms can provide a comprehensive view of the market, offering personalized investment packages, insights and intelligence that can affect decision making and positioning while increasing profitability. Ultimately, these developments’ implications and acceptance strengthen the mainstream acceptance, maturity and endorsement of the cryptocurrency industry.
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On Monday, the US Commodity Futures Trading Commission announced that it has approved an application by Cboe, one of the largest US options exchanges, to offer margin futures contracts for bitcoin and ether.
At a time when parts of the US crypto industry are retreating abroad due to allegationsRegulation by Enforcement“Cboe Digital President John Palmer described the development as a step forward at a time of uncertainty.
“We’re seeing expansion in the US, not decline,” he said wealth in an interview on Monday. “This is a really good example of the hard work on both sides, both on the Cboe Digital side and on the regulators side.”
Futures are a type of derivative contract in which clients speculate on the price movements of assets like bitcoin and ether – a common tool for institutional investors but one that’s growing in popularity among retail investors, particularly in the crypto space.
Although Cboe Digital previously offered crypto futures contracts, it did not allow margin trading. In practice, this meant traders had to quote the full price of a bitcoin to buy or sell futures contracts. With margin contracts, they only have to deposit a fraction initially, which requires less money up front and allows the strategies to generate potentially higher returns on invested capital.
While other platforms, including the CME groupPalmer said that Cboe’s new admission is unique as Cboe also offers spot trading under the same entity, where users trade assets like bitcoin and ether at the current price.
As he explained, this arrangement can be beneficial for traders such as market makers – who provide liquidity to exchanges – as well as other clients looking for greater efficiencies for other strategies such as basic trading, where users look for price differences between spot and look for futures contracts.
A departure from FTX
As Palmer explained, Cboe’s model stands in stark contrast to a proposal by failed crypto exchange FTX, which had applied to the CFTC for approval of a different approach to futures contracts. With Cboe, users cannot buy futures contracts directly on the platform, instead having to deal with futures commission traders, or FCMs — intermediaries who buy or sell contracts on behalf of clients.
in one Application 2022, FTX attempted to cut out the middleman and allow customers to transfer margin directly to FTX without a broker. The process, dubbed disintermediation, has been widely criticized by players in traditional finance for giving retail investors easier access to risky investment products and giving platforms more responsibility.
“This is a very traditional model,” Palmer said of the Cboe approach. “This model has stood the test of time.”
In a statement released after Cboe’s approval, CFTC Commissioner Christy Goldsmith Romero agreed with that assessment, citing Cboe’s more than 50 years of experience operating exchanges.
“The proposed FTX model was never adopted by the Commission, but it jeopardized customer bankruptcy priority, other customer protections and financial stability,” she said.
The Future of Crypto in the US
Cboe’s approval comes at a time when crypto companies are among them Coinbase And Twins move abroad to open derivatives exchanges. While noting that their main motivation is to offer a popular type of crypto derivative contracts that are still not domestically legal and called “perpetuals,” Palmer praised the work of regulators in the US
“From our perspective in the US, we feel very comfortable working with them to continue the responsible growth of the asset class, whether there is regulatory clarity or not, regardless of who the regulator is,” he said wealth. He called the approval “a win for US industry.”
Cboe Digital plans to launch its margin futures contracts for Bitcoin and Ether in the second half of 2023.
https://fortune.com/crypto/2023/06/05/cboe-digital-approval-expand-crypto-futures-products-bitcoin-ether/
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