Cboe Digital has been approved by the CFTC to launch BTC and ETH physically-settled futures contracts.
According to a report from Reuters, Cboe Global Markets (CBOE.Z) has obtained approval from the U.S. Commodity Futures Trading Commission (CFTC) to offer leveraged derivative products on its digital trading platform, Cboe Digital. These products include physically and cash-settled Bitcoin and Ethereum margin futures contracts.
Table of Contents
Cboe Global Markets and Cboe Digital
Cboe Global Markets, known as Cboe, is a U.S. securities and commodities exchange headquartered in Chicago, providing trading, clearing, and investment solutions to global market participants. Its products cover various asset classes including stocks, derivatives, forex, digital assets, and operates in North America, Europe, and Asia-Pacific. Cboe is also a leader in volatility trading, with its Cboe Volatility Index (VIX Index), commonly referred to as the "fear index," being one of its core products.
In May 2022, Cboe completed the acquisition of Eris Digital Holdings, obtaining qualifications for cryptocurrency spot trading, derivatives, and clearing, and rebranded it as Cboe Digital. Minority stakes in Cboe Digital are held by Galaxy Digital, Jane Street, and Robinhood. Now, following approval from the CFTC, Cboe plans to launch Bitcoin and Ethereum margin futures contracts in the second half of the year.
What is Margin Trading?
Margin trading is a financial market trading model that amplifies positions using leverage. Similar to the contract trading commonly seen in the cryptocurrency sphere, margin trading involves leveraging positions. However, Cboe's margin trading is focused on futures products, with specific futures contracts as the underlying assets, unlike perpetual contracts in the cryptocurrency sphere that have no expiration date. The principle is the same - leveraging small amounts to increase potential returns, but if the market goes against the trader, they may face margin calls or forced liquidation, significantly raising risks.
Cboe Digital currently allows trading and clearing of Bitcoin and Ethereum futures on a fully collateralized basis, meaning users must provide the full value of the futures contract upfront. Margin contracts will enable users to trade cryptocurrency futures while requiring less initial collateral, with trades executed and cleared through futures commission merchants. The clearinghouse of Cboe Digital will act as an intermediary counterparty to reduce default risks.
According to a report by Reuters, FTX had previously sought CFTC approval to trade cryptocurrency derivative products, but the application was withdrawn when it filed for bankruptcy in November. Now with formal approval from the CFTC, Cboe Digital becomes the first regulated U.S. cryptocurrency exchange and clearing platform, set to launch new margin contract products in the second half of the year, providing institutions and individuals with more trading options.