During its meteoric ascent, bitcoin has developed a reputation for volatility, but the futures on the high-flying cryptocurrency being planned by some exchange operators could limit some of wild swings associated with bitcoin.
Last week, bitcoin surged to another record after CME Group Inc., the world’s largest exchange owner, said it plans to launch bitcoin futures before the end of this year. CME’s launch of bitcoin futures in the fourth quarter of 2017 will be pending all relevant regulatory review periods.
The new contract will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. Bitcoin futures will be listed on and subject to the rules of CME.
“CME will implement special price fluctuation limits at 7 percent and 13 percent above or below the prior settlement price, and prevent trading outside the 20 percent range,” reports CNBC. “The trading ranges are similar to what is allowed for U.S. stock index futures. But the limits could be more relevant for the notoriously volatile digital currency and could ease investor concerns about investing in the bitcoin product.”
CME Group and Crypto Facilities Ltd. also publish the CME CF Bitcoin Real Time Index (BRTI) to provide price transparency to the spot bitcoin market. The BRTI combines global demand to buy and sell bitcoin into a consolidated order book and reflects the fair, instantaneous U.S. dollar price of bitcoin in a spot price. The BRTI is published in real time and is suitable for marking portfolios, executing intra-day bitcoin transactions and risk management.