CME’s Options Will Not Be Physically-Settled But Delivered In BTC Futures; Despite Growing Demand


It’s an exciting time to be trading on Bitcoin. Futures have already been active among Bitcoin trading for a while, but the Chicago Mercantile Exchange (CME) states that deploying physically-delivered futures aren’t on their agenda. At least, not for now.

Tim McCourt, CME’s Global Head of Equity Index and Alternative Investment Products, released a statement where he explained that CME is having incredible success with Bitcoin futures contracts. They clocked in a daily average of 7000 futures contracts involving bitcoin. This totals to 35 000 bitcoins being traded, on average, every day. The month of May was highly profitable to the firm, with $1.3 billion worth of bitcoin futures traded in that one month.

With all this success, CME declared that it would be introducing options within its futures market. These new options will utilize the CME Group’s technology, matching engine, and clearing mechanisms. At the time of writing, the system is being tested, with plans of release within the first quarter of 2020

Even with this and the fact that physically delivered Bitcoin contract demands are on the rise, McCourt stated that they aren’t planning on giving it. 

Bakkt Daring and Stumbling, Possible Scare for CME

While the CME might be making money from the futures contracts, they aren’t the only ones. Their rivals, the Intercontinental Exchange (ICE) owns a firm by the name of Bakkt. This firm announced last week that they are going to roll out physically delivered Bitcoin futures contracts on their trading platform. However, it seems that the reception of this highly anticipated feature was subpar at best, downright chilly at worst.

They only managed to trade a measly $5 million within the first week. This seems like a tremendous amount on a small scale. Although, trading platforms like Bakkt, CME, and ICE easily go over the billions in money being traded from countless groups that see a million-dollar loss as something manageable.

This could be why CME is careful to dip its toes in the physically delivered market. Simply put, the institutions didn’t seem like the idea of physically delivered bitcoin. This is after much anticipation was boiling over, to begin with. Physically delivered Bitcoin futures contracts will happen; it just seems not to be today. And while Bakkt is suffering from the fact, CME decided to withhold from that option. Whether it’s because of what they saw happening to Bakkt or because of some other reason, is open for speculation.

The CME has dominance within the cash-settled Bitcoin futures, having had their rival Cboe pull last March. This means that they aren’t in any real rush to take significant risks, already having a good paycheck as is. However, massive companies like CME and, as we’ve learned, ICE, tend to have a mandate where they need more profits every quarter, without reaching an upper limit. CME will inevitably go into physically delivered assets, without a doubt. It’s just a question of when institutions are going to be willing to take the plunge into the new age of cryptocurrencies.

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