Futures Traders Must Lay Collateral on the Line

Futures Traders Must Lay Collateral on the Line

While Coinbase have been mitigating risk associated with storing bitcoin, CME have been following suit when it comes to trading. Specifically, they’ve been seeking to reduce their own exposure to losses from traders wagering on the price of bitcoin. Speaking to the Financial Times, CEO Terry Duffy explained that traders may be obliged to place a significant chunk of their futures position as collateral before they’re allowed a seat at the table.

Its common practice for traders to post “good-faith collateral” as insurance against losing positions, but this percentage is typically in single figures. When it comes to bitcoin futures, however, “The margin is yet to be decided, but it’s not going to be standard futures margin,” explained Duffy. “This margin is probably going to be closer to 30 percent.”Testing of CME futures could start as early as Monday November 20, before going live around the start of December.

Back to the Futures

CME aren’t the only Chicago-based entrant into the futures market incidentally – Cboe Global Markets, owners of the Chicago Board Options Exchange and BATS Global Markets, have also announced they’re getting in on the act. In Europe, meanwhile, Swiss bank Vontobel will be launching bitcoin futures as of today, Friday November 17. These “mini futures” offerings will enable traders to short or hedge bitcoin positions. Bitcoin, which was once the preserve of tech geeks, libertarians, and cypherpunks, is fast becoming a play-thing for the world’s billionaire brokers.