Higher Margins Set for CME's Soon-to-Launch Bitcoin FuturesBy
Initial margin requirement for CME bitcoin futures set at 47%
CME set to follow Cboe in launching contracts this weekend
Margin requirements for CME Group Inc. bitcoin futures will be 47 percent next week when the contracts start trading, an increase from the previous plan.
The Chicago-based exchange owner said today in a message to users that it will require 47 percent to be put up at the start of a trade, known as initial margin, and 43 percent to be maintained as the contracts rise and fall in value, known as maintenance margin. The previous initial amount was set at 35 percent and the exchange hadn’t set a level of maintenance margin, according to the company.
CME said the margins were chosen due to volatility, a hallmark of cryptocurrency markets.
CME is bringing the new product to market Dec. 17, a week after a rival. Cboe Global Markets Inc. became the first U.S. exchange operator to offer bitcoin futures on Sunday evening. Initial margin requirements for Cboe’s products were set at 44 percent of the daily settlement price.
Margin requirements are how much investors have to set aside as collateral, so that other parties in the trade know any losses can be covered. The requirement for bitcoin futures is several times that of commodities such as gold and oil.
— With assistance by Matthew Leising