Regulation

Cboe Gets Approval For Margin Trades On Crypto Futures Exchange

Cboe Gets Approval For Margin Trades On Crypto Futures Exchange

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The Commodity Futures Trading Commission has approved an amended order of registration, allowing Cboe Clear Digital to clear additional products as a derivatives clearing organization. 

Green Signal For Cboe 

The announcement means that traders on Cboe Global Markets’ digital-asset exchange would be able to enter into margined Ether and Bitcoin contracts. The amended order will allow Cboe Clear Digital to offer clearing services for digital asset futures on a margined basis for futures commission merchants.

“The Commodity Futures Trading Commission today approved an amended order of registration for Cboe Clear Digital, LLC (Cboe Clear) to clear additional products, subject to the terms and conditions specified in the order, as a derivatives clearing organization (DCO) under the Commodity Exchange Act.”

This will be in addition to the fully collateralized futures and fully collateralized swaps that were previously approved. 

“The amended order permits Cboe Clear to provide clearing services for digital asset futures on a margined basis for futures commission merchants, in addition to the fully collateralized futures and fully collateralized swaps previously authorized.”

Previously, Cboe only offered fully collateralized trading of cryptocurrency futures, which required clients to furnish the entire amount of a particular contract before trading. With margined trading, traders can put up less capital when opening a position. Furthermore, the physical settlement of digital assets will enable traditional financial firms to access Bitcoin and Ether futures without handing over custody to intermediaries. Cboe Digital president John Palmer added, 

“That’s where the concept of us also having a spot market has advantages. We didn’t want to have to force participants to custody or touch the physical asset.” 

Prudent Risk-Mitigation Measures 

Cboe Clear’s parent company, Cboe Digital Exchange, is registered with the Commodities Futures Trading Commission as a designated contract market. This gives Cboe the authority to expand its clearing of futures contracts for crypto assets while ensuring that it does so within the traditional US futures intermediated market structure. Christy Goldsmith Romero, the Commodity Futures Trading Commission president, in a separate statement, added, 

“The Order is accompanied by prudent risk-mitigation measures implemented by Cboe. I have been vocal about the benefits of bringing appropriate crypto activities into the regulated space in order to protect customers, but in a way that supports oversight, accountability, transparency, and risk management.”

Romero added that Cboe’s application was in stark contrast with another from the now-collapsed cryptocurrency exchange FTX for a “bespoke disintermediated direct-to-customer market structure.”

“Too often in recent years, crypto firms have sought to take a business model or market structure that exists in an unregulated environment and port it over to the regulated environment. “Cboe has not done that, instead operating within the parameters of the traditional futures market structure and regulatory framework. It has constructively engaged with the staff and my office to address concerns related to risk and implement risk-mitigating measures.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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