A Robust Futures Market Could Give SEC More Comfort With Bitcoin Products

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A vigorous, regulated bitcoin futures market could make the Securities and Exchange Commission more comfortable with bitcoin exchange-traded products, an agency official said Thursday.

One of the reasons for the disapproval for a bitcoin product by the SEC was that the agency wanted to see if a robust, regulated market developed, David Shillman, associate director, division of trading and markets, said at the Securities Industry and Financial Markets Association’s Listed Options Symposium in New York. If the futures market for bitcoin becomes strong, “that ultimately could give us more comfort,” Shillman said during the event, which was broadcast over the Internet.

Three of the four big U.S. exchanges are planning to start offering bitcoin futures. CME Group Inc. and Cboe Global Markets Inc. have announced plans to offer bitcoin futures. Nasdaq Inc. plans to introduce bitcoin futures next year, according to a person familiar with the matter.

The SEC rejected a bitcoin ETF proposed by Tyler and Cameron Winklevoss in March. The agency said in a filing on its website that Bats BZX Exchange, where the fund would’ve been listed, would be unable to enter into necessary surveillance-sharing agreements given that “significant markets for bitcoin are unregulated.”

Options Clearing Corp. is ready to clear bitcoin futures by Cboe and “we’ll be ready as well” for Nasdaq, John Davidson, president and chief operating officer at OCC, said on the panel. A regulated market for futures trading “should dampen the volatility in the underlying instrument,” he said.

If bitcoin futures go ahead, it would be difficult for any full service broker to not clear that, said Ronald Veith, executive director at JPMorgan Chase & Co. 

“It’s definitely going to be an interesting product,” Veith said.

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