Reported by Financial Times, CME Group, the world’s largest futures exchange, is planning to launch bitcoin trading, aiming to capitalise on surging demand this year among Wall Street money managers to gain exposure to the cryptocurrency sector.
The Chicago-based group has been holding discussions with traders who want to buy and sell the cryptocurrency on a regulated marketplace, according to three people with direct knowledge of the talks. The plan, which has not yet been finalised, would mark a further encroachment by major Wall Street institutions into the digital assets sector following the US Securities and Exchange Commission’s approval in January of stock market funds that invest directly in bitcoin.
Introducing spot bitcoin trading on CME, which already hosts trading in bitcoin futures, would allow investors more easily to place so-called basis trades. A common strategy among professional bitcoin traders and a staple of the US Treasury market, basis trading involves borrowing money to sell futures while buying the underlying asset, and extracting gains from the small gap between the two. The bulk of the Treasury basis trade takes places on CME venues. CME, which caters largely to hedge funds and proprietary traders, has about 26,000 open positions, worth around $8.5bn, on its market in Chicago, more than double the amount 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 storing of crypto assets, the people said.