Cboe Digital, the digital trading platform of the Chicago Board Options Exchange (CBOE) Global Markets, is now all set to offer margined Bitcoin and Ether futures contracts after US Commodity Futures Trading Commission (CFTC) approved its application.
According to a report by Fortune on Tuesday, June 6th, the CFTC approval will make Cboe Digital, one of the largest US options exchanges, the first US-regulated crypto exchange and clearinghouse platform to offer leveraged derivatives when the contracts launch in the second half of 2023.
The US CFTC approved an application from Cboe, one of the largest U.S. options exchanges, to offer margined futures contracts for Bitcoin and Ether.
While CME also offer margined futures contracts for crypto assets, Palmer said that Cboe’s new approval can offer spot trading…
— Wu Blockchain (@WuBlockchain) June 6, 2023
A Positive Development Amid the Regulatory Chaos
Cobe Digital is the rename of the crypto exchange and clearinghouse ErisX. In October 2021, Cboe announced its plan to buy ErisX. The deal was closed in May 2022, and the acquired platform was renamed Cobe Digital.
Futures are a type of derivatives contract where customers speculate on the price movements of assets. Futures trades are growing popular in the crypto space, not only for institutional investors but retail investors as well. Cboe Digital currently offers crypto futures contracts but not margined trades.
While futures contracts require traders to post the full price of a Bitcoin to buy or sell the contracts, margined trades allow traders to put less collateralized capital upfront. Other derivative marketplaces like Chicago Mercantile Exchange (CME) also offer margined futures contracts for crypto assets. However, according to Cboe Digital president John Palmer, Cobe products will be unique as it will also “offer spot trading under the same entity.”
The doomed cryptocurrency empire FTX also applied with the CFTX in 2022 to seek future contract approval that focused on cutting out the middleman and allowing customers to post margin directly to FTX without any brokers. The application was never approved and dropped when FTX filed for bankruptcy in November 2022.
According to Plamer, Cboe Digital’s approach differs, as trades will be executed and cleared through an approved set of member futures commission merchants (FCMs). The platform itself will act as the central counterparty to reduce default risks.
The CFTC approval of Cobe Digital to offer leveraged derivatives products, including physically and financially settled bitcoin and ether margined futures contracts, is a positive development amid the regulatory chaos that has gripped the crypto sector in the US.
The so-called “regulation by enforcement” is forcing the notable segments of the US crypto industry, like Coinbase and Gemini, offshore. Many are trying to survive under the constant threat of regulatory actions by US agencies.
As reported, the US SEC has also sued the world’s largest crypto exchange by trading volume Binance for offering the trade of unregistered securities.