Exchange operator Cboe gets nod to launch leveraged crypto derivative products

Virtu Financial

05/06/2023 23:55

By John McCrank
       NEW YORK, June 5 (Reuters) - Cboe Global Markets
 CBOE.Z  on Monday said it received regulatory approval to offer
leveraged derivatives products on its digital trading platform,
including physically and financially settled bitcoin and ether
margined futures contracts.
    The U.S. Commodity Futures Trading Commission approved Cboe
Digital to be the first U.S.-regulated crypto exchange and
clearinghouse platform to offer leveraged derivatives when the
contracts launch in the second half. 
    The margined contracts will let users trade crypto futures
while putting less collateralized capital up front, with trades
executed and cleared through an approved set of member futures
commission merchants, Chicago-based Cboe said. Cboe Digital's
clearinghouse will act as the central counterparty to reduce
default risks. 
    Cboe Digital currently allows trading and clearing of
bitcoin and ether futures on a fully collateralized basis,
meaning users must provide the full amount of futures contracts
upfront.
    "Derivatives are a time-tested and valuable tool that enable
investors to gain market exposure and manage their risk," John
Palmer, president of Cboe Digital, said in a statement.
    Cboe Digital also supports the spot trading of bitcoin,
bitcoin cash, ether, litecoin and USDC.
    On Oct. 20, 2021, Chicago-based Cboe announced its intention
to buy crypto exchange and clearinghouse ErisX. At the time, the
price of bitcoin topped $67,000. The deal closed in May 2022 and
in July, with the price of bitcoin hovering in the
$20,000-$25,000 range, the exchange operator took a $460 million
writedown on the platform, which it had renamed Cboe Digital.   
    In November, Cboe said 13 firms had taken minority equity
stakes in Cboe Digital, including Robinhood Markets Inc
 HOOD.O , Interactive Brokers  IBKR.O , Virtu Financial
 VIRT.O , Jane Street, Jump Crypto, DRW, and tastytrade, which
is owned by IG Group  IGG.L .
    FTX had sought approval from the CFTC to directly trade in
cryptocurrency derivatives, but the application was pulled when
the firm filed for bankruptcy in November. 

 (Reporting by John McCrank; additional reporting by Hannah Lang
in Washington; Editing by David Gregorio)
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