FxWirePro: CBOE to bring in new norms to regulate Bitcoin futures price mechanism

CBOE, the predominant US derivatives exchange that provides Bitcoin futures contracts, announced the settlement of its XBT futures contract for April month expiry last Friday, this has been the fourth successful contract settlement piloted since its launch in December.

It is reportedly announced by the exchange, more than 557,000 contracts have traded across expiries since its inauguration, in lieu of a notional value of over $5.7 billion. These contracts are cash-settled and were precisely intended to enable traders and hedgers to devise the straightforward trading strategies through settlement to a single, tradable auction price as calculated by Gemini. So, huge speculation is most likely to be expected as the underlying industry is experiencing a lot of R&D activities.

The CBOE eyes to change the method of pricing of bitcoin futures contracts, a move that comes just months after the exchange operator pioneered its launch of cryptocurrency derivatives instrument.

In a lately published letter to the Commodity Futures Trading Commission (CFTC) dated April 17, CBOE Future Exchange (CFE) managing director Matthew McFarland announced a proposed rule amendment that would lower the minimum increment on its futures contracts from 10 points (worth $10) to 5 points (worth $5) sometime on or after May 1. The move would have a "positive impact on the market in XBT futures," McFarland wrote.

The change would apply to single leg transaction, meaning those involving only one contract, and not spread traders, which require an investor to buy and sell two different contracts simultaneously. Spread trades currently have a minimum increment of 0.01 points ($0.01), according to the letter.

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