Challenges of launching cryptocurrency futures
Payal Shah, the director of equity and cryptocurrency products at CME, revealed during Wednesday’s CryptoCompare Digital Asset Summit that the company was looking beyond Bitcoin and Ethereum due to rising client demand and could soon introduce Solana and Cardano futures.
“We are looking at it,” she said, adding that “the number of client requests in anything outside the top two [such as] Solana Cardano” had grown enormously.
Shah, who spoke alongside a panel of top-tier institutional market participants, did acknowledge that certain roadblocks remain in the way of launching cryptocurrency futures. To begin, she stated that Bitcoin and Ethereum futures are settled on an index. CME had contracted five crypto exchanges to share real-time price quotes, allowing the company to set a precise price for Bitcoin and Ethereum futures. As a result, she added that they needed to create a similar index for other cryptocurrencies, which explains the delay in launching any product other than the top two coins.
Additionally, she indicated that the CME was worried about the lack of regulations for cryptocurrencies, especially for altcoins, implying the need for additional due diligence: “We need to know where to send the paperwork,” Shah continued, “do we send it to the SEC, CFTC, to have some regulatory certainty about who is putting their arms around that?”
Last year, a tweet from FirstSquawk, a financial “breaking news” outlet, said that the Chicago-based firm was launching Dogecoin futures. The firm quickly denied the claims.
More Altcoin Futures Are on the Way
Shah emphasized that once all of these blocks were removed, they would begin releasing new crypto products, as this is something that their clients have requested. “The speed at which we are bringing new products to the market I think will certainly continue over 2022 and 2023”.
CME issued bitcoin futures in 2017 and cryptocurrency options in November 2019. The firm later released Ether futures in February 2021, followed by micro Bitcoin and micro Ether futures in May and December, respectively.
CME announced the inclusion of Micro-sized Bitcoin and Ether options to its array of products on March 28, 2022. That being said, the firm has had a successful start, and “the screens are lit” since it began trading crypto derivatives, according to Shah. Thus far, the business has handled about 5 million contracts and more than 1.2 million contracts on Micro bitcoin and Ether futures.