Financial Times: CME Plans to Launch Bitcoin Spot Trading, Sparking Increased Interest on Wall Street
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CME Group’s Bitcoin Spot Trading Plan
Increasing Wall Street Interest in Digital Assets
Advantages of CME Bitcoin Spot Trading
Financial Institutions Embracing Bitcoin
Institutional Investment Flowing into Bitcoin
CME’s Dominance in the Bitcoin Futures Market
EBS Currency Trading Platform and Regulatory Challenges
Industry Skepticism and Anticipation
Financial Times Report
The world’s largest futures exchange, CME Group, is preparing to launch a bitcoin spot trading platform. This move aims to capitalize on the growing demand from Wall Street wealth managers for exposure to the cryptocurrency space. According to internal sources, the Chicago-based company is in discussions with traders interested in trading bitcoin in a regulated market.
This plan, still under consideration, represents a significant step for major Wall Street institutions to enter the digital asset realm. Previously, the US Securities and Exchange Commission approved bitcoin ETFs for direct investment in January. CME declined to comment on the ongoing discussions.
The introduction of bitcoin spot trading at CME will make it easier for investors to engage in basis trading, a strategy commonly used by professional bitcoin traders involving borrowing to sell futures and purchasing the underlying asset. This leverages the small price differential between futures and the physical asset. Most government bond basis trades occur on the CME platform.
Some of the world’s largest financial institutions have shifted from being bitcoin skeptics to supporters. This change is driven by bitcoin’s rebound from 2022 lows to record highs earlier this year, increasing investor acceptance of it as a tradable asset, as well as regulatory crackdowns on illicit market activity. Although bitcoin has lost a fifth of its value since breaking $73,000 in March, bitcoin-linked ETFs have become the fastest-growing ETFs in history.
Hedge funds like Bracebridge Capital and pension funds like the Wisconsin Investment Board have invested over $10 billion in bitcoin-related investment vehicles managed by companies like BlackRock, Fidelity, and Ark. In March, BlackRock CEO Larry Fink expressed long-term optimism about bitcoin, further boosting confidence in the cryptocurrency.
CME has benefited from the renewed institutional interest in bitcoin, surpassing Binance to become the world’s largest bitcoin futures market. The exchange, primarily serving hedge funds and proprietary traders, currently has around 26,000 open positions worth about $8.5 billion, more than double the figure from last year.
CME’s potential spot trading business will operate through Switzerland’s EBS currency trading platform, known for its strict regulation of crypto asset trading and custody. However, traditional exchange operators have had mixed success in the spot crypto trading space. For example, the Deutsche Boerse launched its digital asset marketplace this year, while CME’s rival CBOE Global Markets recently shut down its spot market due to regulatory uncertainty in the US.
Some industry experts are skeptical about CME’s ability to carve out significant market share between Chicago and the Swiss EBS. A crypto trading executive noted that CME’s main benefit is the increased comfort of large regulated exchanges with the infrastructure required to trade digital assets. This development could lead to exchanges accepting crypto-related collateral, such as tokenized money market funds, to facilitate more timely margin calls.
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