The CME Group has revealed that it would not be changing its Bitcoin futures plans despite rival operator, CBOE Global Markets, recently suspending theirs. While speaking to CoinDesk, a spokesperson for the group revealed that there are no changes to their Bitcoin futures contract.
The affirmation of their commitment to BTC futures is an essential piece of news to the crypto sector following the announcement by CBOE on Thursday that it would not be adding an XBT futures contract for trading this month. This implies that once the last traded futures expires in June, the XBT contracts futures will come to a stop at CBOE Futures Exchange (CFE) until new futures are added.
CBOE in its press release stated that the CFE is currently accessing its approach regarding how it would continue offering Bitcoin derivatives for trading. At the moment, they are considering the next steps to take, and they would therefore not list new XBT futures contract for March.
CME volumes significantly higher
The events that took place over the past few days doesn’t come as a surprise as the trading volumes on CME is approximately double than that of CBOE. On March 14, the daily futures trading volume on CME was around 4,666 contracts, against the 2,089 contracts traded on CBOE on the same day.
Some market participants offered explanations as to why CME’s BTC futures outperforms that of CBOE. The primary reason could be the way the two exchanges approached Bitcoin futures and marketed it, according to Lanre Sarumi, CEO of Level Trading Field.
CME ensured that its product is available to a broader range of traders from the start. “Connecting to both CME and Cboe is expensive. If you are already trading other products on an exchange, then there is no new cost. If not, you must pay for connectivity, software license, market data, cross-connects, etc., all that just to trade one new product?” Sarumi explained.
He noted that CBOE listed its XBT futures on its Cboe Futures Exchange (CFE), where most traders trade the exchange’s Volatility Index Futures (VF). For those that don’t trade the Volatility Index, they would have to pay hundreds of dollars per account just to get into Bitcoin futures, and that is something more traders are not willing to do, Sarumi added.
According to Sarumi, CME invested more funds and energy in marketing and promoting its Bitcoin futures. However, CBOE believes traders will seek them out, but that hasn’t been the case so far. Another reason for CME’s success is its price discovery method. While CBOE depends on an auction at the Gemini crypto exchange, CME uses an average price obtained from several spot markets, and this makes them look more reliable to traders.
The director of research at TradeBlock, John Todaro, commented that the flexibility of CME’s strategy could be the primary reason behind their success. He stated that “CME had greater position limits, allowing single accounts to hold a larger number of contracts. Over time, the CME gained greater market share. The Cboe raised contract limits in order to remain competitive late in the summer of 2018, but by this time the CME was trading in significantly higher volume.”
The bear market has dragged on for more than a year, and this has affected a lot of crypto-related businesses. However, CME deciding to stay is a big plus for the crypto space. The competition will get tougher as Bakkt, Coinflex, and a few others are looking to venture into the futures market. The entry of Bakkt and others are highly anticipated by the crypto community as it is believed they could help attract institutional funds to the industry.