Photographer: Andrey Rudakov/Bloomberg

Cboe Signals Big Plans for Trading Cryptocurrency Derivatives

  • Digital currencies are ‘here to stay,’ Cboe’s president says
  • Nasdaq is intrigued by Bitcoin, but needs to differentiate

Cboe Global Markets Inc., an exchange that’s quickly become one of the biggest believers in cryptocurrencies, wants to expand beyond Bitcoin futures.

Introduced in December, Cboe’s Bitcoin contracts trade thousands of times a day, representing tens of millions of dollars of the digital currency. It wants to introduce derivatives contracts on other cryptocurrencies.

“The vision is to have a crypto complex,” Cboe President Chris Concannon said Wednesday at a Futures Industry Association conference in Boca Raton, Florida. Digital currencies are “here to stay,” he added.

Futures have helped introduce the crypto craze to a new class of investor, people who want to make leveraged bets and short sales on Bitcoin while doing business on a regulated exchange. The introduction of derivatives can signal an asset class is reaching the more professional corners of Wall Street.

Concannon and Cboe Chief Executive Officer Ed Tilly, who spoke at the same conference, wouldn’t specify the cryptocurrencies they’re targeting. The biggest besides Bitcoin are Ether, Ripple, Bitcoin Cash and Litecoin, according to The two Cboe executives said their decision would depend on demand from customers and conversations with regulators. Cboe would also like to list exchange-traded notes and funds tied to cryptocurrencies, Tilly said.

Read about Cboe partner’s plan to expand in cryptocurrencies

Other exchanges are also trying to get their bearings in cryptocurrencies.

Cboe’s openness contrasts with the attitude of CME Group Inc., a larger rival that also introduced Bitcoin futures in December. CME CEO Terry Duffy said last month that the futures exchange would take a cautious stance toward expanding to other digital currencies.

Speaking at the futures industry conference Wednesday, CME Chief Operating Officer Julie Holzrichter said that while the company took a measured approach with Bitcoin futures, “as an exchange, sometimes you have to take a risk." She said CME would like Bitcoin to be regulated and that “we made sure to launch with very high margins and tight limits.”

Nasdaq Inc. is interested in offering Bitcoin derivatives, but CEO Adena Friedman said Wednesday that her exchange needs to provide something that’s different enough from what’s already on the market. She also expressed some trepidation over the unregulated nature of underlying cryptocurrency markets.

“The exchange environment for the actual physical instrument is unregulated. That creates a different level of risk,” Friedman said in a panel discussion at the conference on Wednesday.

Read more about Nasdaq’s plans for Bitcoin

In December, Australia’s main stock exchange became one of the finance industry’s biggest backers of the blockchain technology that makes Bitcoin and Ether possible. ASX Ltd. plans to use a system designed by Digital Asset Holdings LLC, the startup run by former JPMorgan Chase & Co. banker Blythe Masters, to process post-trade clearing and settlement.

Friedman said that ASX and Masters have done well to show how that technology can make global markets more efficient. “ASX has done an excellent job of consulting with the community,” she said. “They were a pioneer.”

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