Big Banks Are Not Ready for Bitcoin Futures
December 8, 2017
In the next two weeks, the CBOE and CME will set up the way for institutional investors to the cryptocurrency market by launching Bitcoin futures. It is difficult to predict what exactly will happen when stock giants enter the market, but some of the world's biggest banks seem to be not ready to take the responsibility for the risk this event entails.
With the approval of the Commodity Futures Trading Commission, the two trading platforms will be the first to offer the opportunity to speculate on the virtual currency. Next year Nasdaq should follow suit, like many other banks planning their entry.
What is quite obviously, that important participants of the banking and financial industry are watching closely how Bitcoin market hit the record mark in $ 200 billion. According to the Financial Times, a number of big banks are concerned about the launch of Bitcoin futures, citing huge market volatility.
This week the lobby group, The Futures Industry Association, will submit an official complaint, having stated that the introduction of Bitcoin futures did not follow due process of public participation and transparency. According to the lobby group’s letter, CBOE and CME worked under a "self-certified" regime, moreover they were given permission without any necessary regulator’s participation.
Part of the letter cites serious financial risks for banks: "These new products are not potential risky and the decision should be reviewed. We also understand that not all risk committees of the relevant exchanges were able to take part in the launching of these products. "
The contract margin is managed by a clearing house, which is basically an intermediary between the two parties of a future contract. If one of the parties does not honor its commitment, in that case the clearing house serves as a protection system.
As a result, some big banks are concerned because they partially finance these clearing houses- meaning they certainly risk due to the futures contracts.
Nevertheless, some brokers are already ready to start trading next week. The head of Wedbush Futures, Bob Fitzsimmons, says the customers always come first: "We could sit for hours and take part in philosophical discussions about Bitcoin, its legitimacy and uses, but our task is to service our customers."