Exchange Giant CME will launch Bitcoin futures by 2018

A big boost for Bitcoin recently, may have come from the Chicago Mercantile Exchange (CME) & Chicago Board of Trade, announcing its futures specs last week for Bitcoin. Leo Melamed, Chairman Emeritus of CME Group , one of the largest exchange groups in the world, told the press that Bitcoin is set to become a new asset class called “BTC BTIC: BTB” and will be traded during normal business house alongside other options during the CME Globex and CME Clearport trading hours.

Last week the CME Group announced it was adding Bitcoin to its exchange before year’s end and now they have released The BTC futures specs giving more details to how the fund will be traded.

As futures get ready for trading, CME Group this week sent out a note outlining how Bitcoin futures will work. Here's what you need to know:

  • Each contract is composed of five Bitcoin.

  • Each contract is composed of five Bitcoin.

  • Each tick (the minimum fluctuation) will be $5 per Bitcoin, amounting to $25 per contract. This means that every time the contract moves by the smallest increment a trader will gain or lose $25 per contract they hold.
  • Bitcoin futures will trade on CME Globex and CME ClearPort from 5 p.m. to 4 p.m. CT Sunday to Friday. The long trading hours are typical of futures contracts that are traded electronically.
  • There is a spot position limit of 1,000 contracts. Futures contracts always have limits on the number of contracts one person or entity owns. This prevents someone from being able to "corner the market."
  • Bitcoin futures will have a price limit of 20% above or below the prior settlement price.
  • Price settlement will be based on the Bitcoin Reference Rate, or a daily reference rate of the US dollar price of one Bitcoin as of 4:00 p.m. London time.

There are also plans for CME Group to create price fluctuation limits during trading, thus reducing Bitcoin volatility. The plan according to publication documents released by CME group is to initiate thresholds when the value of Bitcoin futures fluctuate by more than 7%, 13%, and 20%. Reaching these limits may cause trading to pause for two minutes during these sudden price fluctuations, in an attempt to stabilize the market and will have a price limit of 20% above or below the prior settlement price.

Chairman Emeritus of CME Group, Leo Melamed believes that Bitcoin has become a new asset class and that mainstream investors will also help control the volatility of cryptocurrency. The 85 year old Chairman further went on to say that despite not being initially convinced of Bitcoin, that it reminded him of opening his first currency trading platform back in 1972.