A federal regulator gave the go ahead on Friday to the CME Group to start trading bitcoin futures later this month, the first time the digital currency will be traded on a Wall Street exchange and subject to federal oversight.
The CME Group, which owns the Chicago Mercantile Exchange, will start trading bitcoin futures from December 18, the company said. "At launch, our new Bitcoin futures contract will be subject to a variety of risk management tools, including an initial margin of 35 percent, position and intraday price limits, and a number of other risk and credit controls that CME Group offers on all of its products", Duffy said.
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Bitcoin's price has soared tenfold this year, but many market participants warn of a bubble as it topped $11,000 for the first time last week. It was trading Friday at around $10,500, after being worth roughly $1,000 at the beginning of the year.
Bitcoin's price levels have mostly displayed incremental gains within the $11,000 price range. "We are committed to encouraging fairness and liquidity in bitcoin markets".
Bitcoin hit a record above US$11,400 last Wednesday, but then lost 20% of its value in the following 24 hours. CBOE has already expressed its desire to list these products, and - just this week - The Wall Street Journal reported Nasdaq Inc. hopes to list bitcoin futures on one of its USA exchanges during the first half of 2018.
"The price rises are triggered by continued media interest driven by the expectation of futures trading on CME", Charles Hayter, founder of data analysis website Cryptocompare, said.
However, despite the cash-settlement process, some institutional investors have expressed concern at the addition of bitcoin-derived products to CME.