Bitcoin ETFs Are Likely to Follow Futures, Cboe President Says

  • Chicago exchanges are in competition to offer bitcoin futures
  • Bitcoin’s price has surged more than sevenfold this year

Why a Bitcoin ETF Is Likely to Be a Reality Next Year

Cboe Global Markets Inc. sees bitcoin exchange-traded funds on the horizon.

The Chicago-based exchange operator is competing with local rival CME Group Inc. to introduce bitcoin futures. Cboe announced in August that it wanted to offer the contracts, which would use Gemini bitcoin market data, by the end of this year or early next year. Each company needs approval from the U.S. Commodity Futures Trading Commission.

“With regulated futures of a certain asset class like a bitcoin, you do have an opportunity to introduce ETFs and over time we do envision ETFs coming to market,” Chris Concannon, Cboe’s president, said in an earnings conference call Tuesday.

CME Group said last week it planned to list bitcoin futures before the end of the year. Ed Tilly, Cboe’s chief executive officer and chairman, said in the call Tuesday that it’s “not surprising CME recognizes the same benefits of offering a transparent market.”

The exchanges are catering to customers clamoring to trade cryptocurrency-related products at a venue they are familiar and comfortable with. The creation of exchange-traded funds could be a benefit to Cboe, which lists ETFs on its equities markets, which are regulated by the U.S. Securities and Exchange Commission. CME does not list ETFs because it is not a securities exchange.

“The cryptocurrency space is a space that I think we believe in and certainly our competitor across town believes in as well,” Concannon said. “I’m just encouraged by that validation.”

Derivatives expand the market and increase liquidity by letting investors bet on gains or declines, and allowing trading firms to adopt market-neutral strategies, finishing each day even. They also are key to the creation of investment products like ETFs for a broader range of institutional investors, which generally are restricted to buying regulated securities.

Read More: A Bitcoin ETF May Be the Next Big Thing on U.S. Exchanges

The SEC in March rejected a bitcoin ETF proposed by Tyler and Cameron Winklevoss -- the co-creators of the Gemini exchange -- saying necessary surveillance-sharing agreements were too difficult given that “significant markets for bitcoin are unregulated,” according to the agency. CME and Cboe, on the other hand, are closely watched by officials in Washington.

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