Broker Cantor Fitzgerald LP and Nasdaq Inc. have been paying a lot of attention lately to the sphere of Bitcoin trading. Nasdaq is aiming to launch Bitcoin futures within the first half of 2018 fiscal much in lines with Chicago Mercantile Exchange (CME).
Cantor on the other hand have also announced that it is aiming at launching bitcoin derivatives in its exclusive exchange within a similar time span. The recent moves taken up by these Wall-Street honchos come in the aftermath of a similar position taken by two of the biggest exchange operators in Chicago which voiced simultaneous plan of action in regard to cryptocurrencies.
The notorious volatility inherent with Bitcoin trading and its linkage with criminal activity and money laundering have till now kept a large number of financial institutions at bay. However given its recent price surge, the general interest have received positive stimulus which is showcased by an increasing number of customer registrations in all Bitcoin trading platforms worldwide. Stating from the beginning of 2017, Bitcoin has underwent a massive 10 times price hike. In January 2017, Bitcoin price was $1000 but now Bitcoin is trading in a range of $10,000 due to huge gain in global demand for Bitcoins.
Once the Bitcoin futures are launched, it will denote that the crypto market which is less than a decade old had ultimately achieved the level of maturity needed for its normal functioning. Futures market shall become a much more easier place for both retail investor and big banks to engage in bitcoin trading by letting traders speculate on its rise and fall.
The Bitcoin contract of Nasdaq shall debut on NFX or Nasdaq Futures which is a market place launched by the New York-based exchange group way back in 2015 and has been focussing primarily on energy trading. An insider source revealed that Nasdaq is aiming at doing something different from its rivals CBOE Global Markets Inc. and CME Group Inc. two Chicago based exchange groups which have made an announcement of launching Bitcoin futures very soon. Such a futures contract shall help in tracking the global price of Bitcoin. Market participants have already been briefed by Nasdaq about its course of action. Nasdaq’s relationship with Bitcoin has been brewing strong for quite some time now. It has already listed a digital currency linked exchange-traded note on one of its European exchanges.
Global financial firm, Cantor founded way back in 1945 deals in a large variety of businesses ranging from investment banking to bond brokerage to real estate. It unveiled its plans of launching bitcoin-derivatives during a recent interview conducted by The Wall Street Journal. Cantor is hoping to launch Bitcoin swap which is a derivative form in its Cantor Futures Exchange LP. The traders can bet on bitcoin prices powered by this swap up to three months under the shield of built-in protections which will limit losses if the price of bitcoin sways above $15000 or below $5000. Retail traders are expected to be the foremost adopters of this brand new contract. But institutional players will also being targeted in due course. Shawn Matthews, the chief executive of Cantor Fitzgerald & Co., which is the firm’s brokerage arm was recently quoted as saying that,
“The asset class is not going away. If you look at the next level, it will be the institutions coming in and being larger participants in the marketplace, especially as liquidity gets better.”
The exchange platform of Cantor shall serve as a backwater for futures market a few of whom are thinly traded contracts tied to foreign-exchange rates, weather events and gold. Cantor however has received a license from the Commodity Futures Trading Commission which will make it easier to launch bitcoin futures in its exchange compared to creating one from the scratch. The exchange created a major hype back in 2010 when it tried introducing a futures contract which was based on the results of Hollywood blockbusters. However Cantor’s plan got thwarted following major opposition by film-industry lobbyists forcing Congress to ban all futures tied to a movie’s financial performance.
The decade old Nodal Exchange LLC, which is a futures exchange specialized in trading of natural gas and electricity is also exploring possibilities of launching cryptocurrency futures. The majority of its parent company is owned by Deutsche Börse AG, a German exchange. However the future path wont be easy for Nodal Exchange which is sure to receive tremendous competition from established futures exchanges. The world’s biggest exchange conglomerate CME is planning to launch Bitcoin futures within the second week of December and CBOE have set an early 2018 date for coming forward with the same. CFTC shall be reviewing the planned contracts of both CBOE and CME.
With cryptocurrencies and bitcoin in particular gaining massive popularity, the opportunities for exchanges to reach their full potential has also been taken advantage of. John D’Agostino, a former Nymex executive acting as part of the board committee to several funds which are either trading or considering trading cryptocurrencies recently said that, “Every research department of every regulated exchange is saying, ‘Can we do this?.’” He feels that Futures exchanges often have to struggle for attracting the requisite level of liquidity and interest of investors in new products. He also added that such product launches shall become easier given the boom in digital currencies. “The majority of costs associated with that are marketing. If people want to trade this thing, why wouldn’t you? This is a gift from the heavens,” Mr. D’Agostino said.
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Tarunima Ghosh Laha is a Finance Post Grad from St. Xaviers who believes Finance is more than just Balance Sheets and Ledger creation. This filmy bookworm who believes she was a sloth in past life also nourishes a penchant of owning a private zoo someday. Equipped with a laptop and online Lexicon she is all set to give finance a glamorous makeover in the form of exciting writeups with bang on info and flashy new words.