Bitcoin Futures Pave Way for Ether Derivatives From CDS Pioneer

  • Code-named ‘Virtuoso,’ exchange’s backers include Sunil Hirani
  • Follows plans by CME and Cboe to create bitcoin futures

Bitcoin: What’s Coming in the Year Ahead

The second-biggest cryptocurrency is poised to get a derivatives market, thanks in part to a pioneer of trading credit-default swaps, according to two people familiar with the matter.

Contracts on the ether digital currency will be offered by an as-yet-unnamed exchange going by the code name “Virtuoso,” according to one of the people, who asked not to be named discussing private information. One of its co-founders is Sunil Hirani, who sold the CDS brokerage he co-founded, Creditex Group, to Intercontinental Exchange Inc. in 2008 for about half a billion dollars, the person said.

The plan comes on the heels of CME Group Inc. and Cboe Global Markets Inc.’s decision to offer bitcoin futures, a sign the cryptocurrency business is maturing. Derivatives on bitcoin and ether could help lure professional traders and investors, who’ve been hesitant to dive into unregulated digital currency markets.

Though bitcoin gets more headlines, ether is serious business. It’s linked to the ethereum blockchain. When Wall Street banks and big corporations like International Business Machines Corp. tout blockchain innovations, they’re usually cribbing technology from ethereum, not bitcoin’s blockchain. (Blockchain is the name of the software ledger that makes digital currencies possible.) Ether, which has soared more than 4,000 percent in 2017, hit record highs after CME Group announced its bitcoin futures project last month.

Virtuoso will be overseen by the U.S. Commodity Futures Trading Commission and aimed at institutional investors and corporations that have exposure to ether’s price swings, according to one of the people familiar with the matter. By the first or second quarter, it plans to offer futures, non-deliverable forwards, swaps and forwards, and it’s possible -- though this is not yet decided -- that some of the contracts will deliver ether to holders if held to expiration, the person said.

Hirani also co-founded Digital Asset Holdings LLC, a blockchain software firm headed by Blythe Masters, another key figure in the early days of CDS trading.

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