Spread Bettor IG Among Biggest Holders of Bitcoin Futures

Updated on
  • IG Group says it hedges exposure using futures and underlying
  • CME’s contract now has greater open interest than Cboe

A company offering some of the riskiest trades in financial markets is hedging its exposure to bitcoin, making it one of the biggest players in the embryonic cryptocurrency futures market.

London-based IG Group Holdings Plc, which offers spread-betting contracts on commodities, currencies and cryptocurrencies to “sophisticate, rich” investors, lays off its risk exposure by buying bitcoin outright, and by using the futures markets. IG Group said it holds 20 percent of the bitcoin positions offered by CME Group Inc. The firm doesn’t yet trade the Cboe Global Market Inc. contract, but may do so as soon as this week.

“The futures market has a number of open contracts, and if you look at the CME contract, we hold 20 percent of the open interest,” Chief Executive Officer Peter Hetherington said in an briefing on Tuesday. “We don’t want any more.”

The company hedges its exposure to bitcoin and five other cryptocurrencies offered to clients through futures and by holding the assets in so-called cold storage, where customers’ digital keys are held off line from network connections, and even sometimes on computers housed in vaults to prevent theft. The two Chicago-based exchanges launched bitcoin contracts in December. IG Group says the cost of hedging means it has to limit the amount of cryptocurrency that can be traded on its network.

More than 1,000 CME contracts -- each of which represents five bitcoin -- are owned by customers, according to open-interest data from the exchange. Cboe open interest was 4,011 contracts. Hetherington said IG Group isn’t active on the Cboe, but may be soon. He said that more companies, including banks, will start using the contracts as they mature.

“We would love to use Cboe as well, we can’t at the moment, because we don’t have a clearer yet,” Hetherington said in the company’s London offices, adding that doing so would allow it to let people trade more crypto on the IG Group platform. “We will have a clearer at the end of the week.”

Bitcoin fell 1.1 percent to $14,771 as of 3:07 p.m. in New York. The coin rose 1,400 percent last year, but ended 23 percent below its all-time high of $19,511, set the day CME Group launched its version of bitcoin futures.

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