CFTC Approves Cboe’s Revolutionary Futures Contracts For Bitcoin And Ether Trading

Key Points:

• The CFTC has approved Cboe to offer margined futures contracts for Bitcoin and Ether, a significant development in the crypto space.
• The model starkly contrasts FTX’s proposal for futures contracts, which put customers’ bankruptcy priority, other customer protections, and financial stability at risk.

According to Fortune, The U.S. Commodity Futures Trading Commission (CFTC) has approved an application from Cboe, one of the largest U.S. options exchanges, to offer margined futures contracts for Bitcoin and Ether.

This is a significant development, as Cboe’s new approval is unique because it also offers spot trading under the same entity, where users are trading on the current price of assets like Bitcoin and Ether. Futures are a type of derivatives contract where customers speculate on the price movements of assets like Bitcoin and Ether—a standard tool for institutional investors but one that is growing more popular with retail investors, especially in the crypto space.

Cboe Digital President John Palmer described the development as a step forward during uncertainty. Meanwhile, Cboe Digital had previously offered crypto futures contracts, it did not allow margin trades. With margined contracts, they only need to post a fraction initially, requiring less money upfront and potentially allowing strategies to earn higher returns on the capital deployed.

While other platforms, including the CME Group, also offer margined futures contracts for crypto assets, Palmer said that Cboe’s new approval is unique because it also offers spot trading under the same entity, where users are trading on the current price of assets like Bitcoin and Ether.

As he explained, this arrangement can be advantageous for traders like market makers—who provide liquidity to exchanges—as well as other customers looking for greater efficiencies for other strategies like basis trading, where users look for price differentials between spot and futures contracts.

Cboe’s model starkly contrasts a failed crypto exchange FTX proposal, which sought approval for a different approach with the CFTC for futures contracts. With Cboe, users cannot buy futures contracts directly from the platform but must instead go through futures commission merchants or FCMs—intermediaries who buy or sell contracts on behalf of clients. The Commission never adopted the proposed FTX model, but it put at risk customers’ bankruptcy priority, other customer protections, and financial stability.

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