CME Seeks CFTC Approval to Double its Bitcoin Futures Contract Offerings

The Chicago Mercantile Exchange (CME), one of the first platforms to launch the Bitcoin Futures contracts has reached out to the U.S. Commodities and Futures Trading Commission (CFTC) seeking an approval to double their Bitcoin Futures contracts offering.

In a letter to the CFTC earlier this month, the CME Group requested to allow single investors to trade upto 2000 contracts a month. Currently, the CFTC permits each trader to trade a 1000 contracts with each contract comprising of 5000 Bitcoins.

It means that individual traders on the CME platform can trade $50 million worth contracts on date. If CME manages to get the CFTC approval, this limit will double to $100 million worth contracts.

The CME Group has witnessed a massive demand in Bitcoin Futures contracts over the last few months. In July 2019, the platform saw its open-interest contracts shooting to 6100.

One of the company spokesperson said that based on the current market growth, the company seeks to increase these limits “based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market,”

The letter reads: “Chicago Mercantile Exchange Inc. (CME” or “Exchange”) hereby notifies the Commodity Futures Trading Commission (“CFTC” or “Commission”) that it is self-certifying an increase of the spot month position limits for the Bitcoin Futures contract (the “Contract”), commencing with the October 2019 contract month and beyond.”

It means that if the CFTC gives a go-ahead, then starting next month the CME Group can double its contract limit.

Note that the CFTC puts these limits to prevent any sort of excessive speculation for any sort of futures product for a given commodity. This helps to significantly reduce the volatility in trading the assets and moreover it keeps the market free from any sort of manipulation.

Since the beginning of 2019, over 12000 new customers have signed to the CME platform. The spokesperson said: “This is one more way we’re providing customers, institutional traders and end-users with additional flexibility to trade and hedge bitcoin price risk”.

CME competitor CBOE Exchange shut down its operations earlier this year in March 2019. Currently, the CME Group is the sole player offering Bitcoin futures contracts in the U.S.

However, it is soon to meet some competition after the launch of ICE’s Bakkt Bitcoin Futures contracts ahead this month on September 23. Bakkt’s Bitcoin futures differ from CME’s in a way that they are physically-settled contracts while CME’s offering of Bitcoin futures is cash-settled.