The Chicago Mercantile Exchange is looking to launch Bitcoin spot trading for its users. The world’s largest derivatives exchange intends to capitalize on renewed traction by doing so. Its plans, however, are not yet definitive.
Citing anonymous sources with “direct knowledge” about the internal state of affairs, a recent Financial Times report noted,
“The Chicago-based group has been holding discussions with traders who want to buy and sell the cryptocurrency on a regulated marketplace.”
They further revealed that the spot trading business would be carried out from the EBS currency trading venue in Switzerland. The European country’s crypto landscape is quite dynamic. This asset class is deemed legal over there. In fact, in some cities, it is also considered legal tender. To add to the feathers in its hat, the country was also one of the first to implement legal regulations for blockchain technology.
Operating from two different markets - Chicago [CME] and Swiss [EBS] - would come with its own set of challenges on the efficiency front. Nevertheless, there is a silver lining to this. Regulated exchanges are gradually becoming comfortable with crypto infrastructure. As pointed out by a crypto trading executive, exchanges could “soon accept crypto-related collateral, such as tokenized money market funds, to make more timely margin calls.”
CME already facilitates futures trading on its platform. The opening up of spot trading would help foster cash-and-carry trades - an arbitrage strategy where traders take advantage of the difference in spot and derivatives prices.
The Number Talk
With the launch of spot Bitcoin ETFs in the US, institutions have already stepped into the arena. Take the case of BlackRock’s iShares Bitcoin Trust itself. Hedge funds are already making their foray by stacking up shares. Mutual funds, sovereign wealth and pension funds follow right behind. This depicts that the institutional market is hungry to gain exposure to spot BTC, and CME is strategically placing itself in a position to be able to feed them.
That being said, it is important to note that the exchange has not confirmed its intentions of launching spot Bitcoin trading. The Financial Times reported that the CME team outrightly declined to comment.
It's a known fact that the CME, by and large, deals with proprietors and hedge funds. It has over 137.58k BTC in open positions [valued around $9.07 billion] on its Chicago market. The number has registered a multi-fold increase when compared to its $1 billion lows from last year. At the moment, CME controls more than 1/4th of the total derivatives market share and is followed by Binance and Bybit.
