Bitcoin
Futures exchange CME plans to launch bitcoin trading
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CME Group, the world’s largest futures exchange, is planning to launch bitcoin trading, aiming to capitalize on growing demand this year among Wall Street money managers to gain exposure to the cryptocurrency sector.
The Chicago-based group has been in discussions with traders who want to buy and sell cryptocurrencies in a regulated market, according to three people with direct knowledge of the negotiations.
The plan, which has not yet been finalized, would mark a new invasion by major Wall Street institutions into the digital asset sector, following the US Securities and Exchange Commission ruling. approval in January, from stock market funds that invest directly in bitcoin.
CME declined to comment.
The introduction of bitcoin spot trading on the CME, which already hosts bitcoin futures trades, would allow investors to more easily carry out so-called basis trades. A common strategy among professional bitcoin traders and a staple of the U.S. Treasury market, basic trading involves borrowing money to sell futures while buying the underlying asset and extracting gains from the small difference between the two. Most Treasury-based trading occurs on CME venues.
Some of the world’s largest financial institutions have turned from skeptical supporters of bitcoin, thanks to its strong recovery from a 2022 low to reach an all-time high earlier this year, as well as its growing acceptance among investors as a tradable asset and repression by regulators. about illegal market activities.
Although the token has lost a fifth of its value since its March peak above $73,000, exchange-traded funds linked to the coin have become the fastest-growing ETFs of all time.
Hedge funds, including Bracebridge Capital, and pension funds, such as the Wisconsin Investment Board, are among the large investors that have invested more than $10 billion in assets in vehicles managed by asset managers, including BlackRock, Fidelity and Ark. BlackRock chief executive said he was “long-term bullish” on bitcoin.
CME has been one of the biggest beneficiaries of the wave of renewed institutional interest, overtaking Binance as the world’s biggest bitcoin futures market as traders try to profit from the currency’s volatility.
CME, which primarily serves hedge funds and proprietary traders, has about 26,000 open positions worth about $8.5 billion on its Chicago market, more than double the value from a year ago.
Its potential spot trading business would be run through the EBS currency trading venue in Switzerland, which has extensive regulations governing the trading and storage of crypto assets, the people said.
Large traditional exchange operators have a spotty track record in trading spot cryptocurrencies. Deutsche Börse opened its own digital asset market this year, but CME rival CBOE Global Markets said last month it would close its spot market business, blaming a lack of clear regulation in the US.
A cryptocurrency trading executive questioned whether CME could build significant market share if its bitcoin trading business operated as two exchanges, CME in Chicago and EBS in Switzerland. “I struggle to see how they would get all the efficiencies available to them,” he said.
He added that the biggest benefit of the CME’s move was that large regulated exchanges were becoming more comfortable with the infrastructure for trading digital assets, such as keeping currencies securely protected.
This means exchanges may soon be able to accept crypto-related collateral, such as tokenized money market funds, to make more timely margin calls, he said.