Much ado has been made by the CME’s decision to list bitcoin futures—and the acceptance and support voiced by the CFTC in move. But not everyone is happy. Not only has the ICE chosen not to list Bitcoin futures products, but the FIA—a leading industry group—has essentially voiced concern that listing futures at this time is premature.
In an open letter to the CFTC’s chair, the FIA’s CEO and President Walt Lukken writes:
In light of the CFTC and NFA’s public statements regarding the riskiness of the underlying cryptocurrency products, we believe that the launch of new exchange-traded derivatives in cryptocurrencies deserves a healthy dialogue between regulators, exchanges, clearinghouses and the clearing firms who will be absorbing the risk of these volatile, emerging instruments during a default. Unfortunately, the launching of these innovative products through the 1-day self-certification process did not allow for proper public transparency and input. Under law, exchanges may self-certify a product for trading by the close of business one day and then list the product for trading the next day. This process does not require CFTC approval or input and allows little or no time for public review.
And then Mr. Lukken turns, most interestingly, to the underlying challenges of applying this process in light of the uncertainties facing bitcoin as a product for trading:
While suited for standardized products, this process does not distinguish for a product’s risk profile or unique nature. We believe that this expedited self-certification process for these novel products does not align with the potential risks that underlie their trading and should be reviewed. Given the lack of historical data on these products, it is further concerning to clearing members that they will bear the brunt of the risk associated with them through their guarantee fund contributions and assessment obligations, even if not participating in these markets directly, rather than the exchanges and clearinghouses who have listed them. A public discussion should have been had on whether a separate guarantee fund for this product was appropriate or whether exchanges put additional capital in front of the clearing member guarantee fund.
These are notably not the first time these criticisms have been voiced—and earlier exchange crashes, along with today’s wild trading activities on bitcoin exchanges suggests, at a minimum, that the infrastructure to support trading may not be firmly enough established, whatever the merits futures trading may provide.