We do the research, you get the alpha!
Bitcoin futures trading platform Bakkt is planning to offer cash-settled bitcoin futures contracts starting next year, according to Adam White, Bakkt’s chief operating officer. “We have the intention of offering a cash-settled contract as well,” he told audiences at the Coindesk Invest conference in New York yesterday.
According to CoinDesk, the cash-settled monthly futures contracts will be offered at Bakkt owner Intercontinental Exchange (ICE) Singapore exchange ICE Futures and will use ICE Clear, its Singapore clearinghouse. The publication also quoted anonymous sources as saying that ICE is already in talks with the Monetary Authority of Singapore (MAS) to launch the product before the end of this year.
Bakkt is the world’s first crypto futures platform to offer physically-settled contracts. Its decision to offer cash-settled contracts sets it up in direct competition with the Chicago Mercantile Exchange (CME) Group, which began offering the product in December 2017. After a tepid start, CME’s Bitcoin futures contracts have taken off this year and the exchange plans to launch Bitcoin options based on the futures contract next year.
Who trades in regulated Bitcoin futures markets?
The increasing popularity of cryptocurrencies as an investment avenue has resulted in a diversity of customers flocking to the crypto-futures markets. “[Our product] is for people who want to access cryptocurrency markets but don’t do the necessary process of opening wallets or doing storage,” said Tim McCourt, CME’s Global Head of Equity Index and Investment Management.
That category included a balanced participation from customers who used the contracts for hedging against risk, such as miners, and others who used them to profit from crypto volatility, he said. There is a 50/50 split between U.S. and non-U.S. customers and institutional and retail customers for CME’s contracts, he added.
White provided additional color on customers for Bakkt’s monthly futures contracts during his appearance at the conference yesterday. He said they designed contracts using ICE’s foundational approach of analyzing whether customers were using their contracts to speculate or hedging against risk.
While Bakkt’s contracts are not available to retail customers, they can be accessed via brokerage firms such as Interactive Brokers. “Their availability in retail brokerage firms is healthy as it creates a heterogeneous environment of participants,” he said. That said, McCourt said the contracts have “really helped businesses hedge and manage risk,” he explained, and added that they have witnessed an influx of new customers since launch.