In an interview with The Edge Markets, ICE Vice-President Jennifer Ilkiw said that a larger number of institutional investors are taking interest in trading Bitcoin Futures.
Exchanges Lack Risk Management Procedures
Ilkiw said that institutional investors are unable to trade the same on existing exchanges as they continue to be unregulated entities. Furthermore, many of the exchanges lack risk management procedures and comprehensive market surveillance and supervision system to spot market manipulation.
“We have a lot of high-frequency traders who are interested in it. There are also institutional fund managers and brokers calling us to say that they want to trade bitcoin futures,”
In March, the CBOE had announced that it was reconsidering its approach of offering Bitcoin futures contracts.
ICE is Trying to Fill Gaps
A CNBC news report then suggested that said the CBOE’s decision to stop offering the product could possibly be due to a drop in demand in the retail market last year. This was when Bitcoin prices crashed to about US$13,000 from a peak of about US$20,000.
“In general, there is a lack of institutional infrastructure and platforms to trade [bitcoin] with. That is why we are trying to fill the gaps,”
She then mentioned that this was primarily the reason why ICE, together with other investors, set up the Bakkt Trust Company LLC to offer institutional investors Bitcoin custody services and “physically delivered” Bitcoin Futures contracts
These are offered through a partnership between Bakkt, ICE Futures US. ICE Clear US. The former provides futures and options trading whereas the latter handles confirmation, settlement, and delivery of transactions.
She further added that Bakkt bitcoin futures contracts allow investors to trade one Bitcoin per contract. Also, users can trade up to 100,000 contracts. Bakkt offers investors two types of bitcoin futures contracts – daily and monthly futures contracts. The settlement date for its monthly contracts is on the third Wednesday of the month and the delivery of bitcoins takes two days.
ICE Offers Adequate Protection Measures
Furthermore, Ilkiw suggested that ICE has sound protection measures in place as it has a large pool of investors and the amount of money involved in a single case of fraud could be huge.
“The existing exchanges are relatively small and may only offer cryptocurrency futures contracts to retail investors. An investor may lose a lot of money trading with them, but the counterparties will still receive their money while the exchange continues to operate,”
When questioned on if major exchanges would adopt a ready approach before getting involved with Bitcoin, she said that ICE launched Bakkt to position itself for the future trends of digital assets, including other asset-backed and non-asset-backed cryptocurrencies.
Will Bitcoin Futures continue to create the same hype in the near future as well? Will we see more exchanges rolling out Futures products? Let us know, what you think in the comments below!