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US exchanges are racing to secure their piece of the cryptocurrency market causing Bitcoin prices to surge as a result.

According to numerous sources, both CBOE and CME have announced they will soon trade cash-settled bitcoin futures. One of the exchanges will likely dominate due to the network effect.

This news has fueled “Fear of Missing Out” or “FOMO” for new investors with over 100,000 new Coinbase accounts created since the original announcement.

CME Bitcoin Futures Trading Starting December 11, 2017

The Chicago Mercantile Exchange (CME) actually looks like it will start on Globex on the evening of Sunday Dec. 10, but it will be for Dec. 11 trade date. According to the official contract specs, each contract will be for 5 Bitcoin, with minimum ticks of $5 per Bitcoin, or $25 per contract.

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“Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract,” – Terry Duffy, CEO of CME

CME CF Bitcoin Reference Rate & CME CF Bitcoin Real Time Index

CME CF Bitcoin Reference Rate (BRR) and CME CF Bitcoin Real Time Index (BRTI), a standardized reference rate and spot price index with independent oversight are accelerating the professionalization of bitcoin trading. BRR and BRTI launched November 14, 2016.

Several bitcoin exchanges and trading platforms will provide pricing data, including Bitstamp, GDAX, itBit and Kraken.

Margins

Market participants will only have to put up an initial margin to either buy or sell the contract. Both buyers and sellers have to post this margin. Each day, the exchange “marks to market” the contracts based on the settlement price that day. If the price has gone up, the exchange moves margin money from the accounts of the short positions to the accounts of the long positions.

 It is not clear at this point how much the margin will be. The CME generally sets margins to cover 99% of potential price moves. (Understanding Margin Changes – OpenMarkets) Based on the last year of daily return data, the 99% level would be about 14%, or $6,300 for the five bitcoin CME contract and $630 for the smaller one bitcoin CBOE product.

These contracts will be cash settled. This means that instead of the shorts physically delivering bitcoins in exchange for cash, the long and short positions will just settle up in cash based on the final settlement price. As there have been daily markings to market during the life of the contract, this final mark to market is nearly a non-event.

CEO Terry Duffy Elaborates on Bitcoin Futures at CME

CBOE Teams up with Winklevoss Twins for Bitcoin Data

The Chicago Board Options Exchange, (CBOE Holdings Inc.,) which oversees the largest U.S. options exchange has entered an agreement with brothers Cameron and Tyler Winklevoss to use Bitcoin market data. The move paves the way for Chicago-based CBOE to list Bitcoin derivatives.

If You Can’t Beat Them, Join Them

When asked earlier this year, JP Morgan took a firm stance against Bitcoin with CEO James Dimon stating that “Bitcoin is a Fraud.” He derided buyers as “stupid” going on to say “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.” Bitcoin trades fell to session lows after Dimon’s comments. When asked his course of action regarding his own traders involved in Bitcoin, he responded:

“I’d fire them in a second. For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.” – James Dimon, JP Morgan CEO

However, Bloomberg recently reported that the JP Morgan has admitted that they gotten large volumes of inquiries about Bitcoin and that he and his team are set to weigh demands and risks in the immediate future.

The outspoken CEO does believe the technology backing bitcoin, blockchain, is valid and the bank is experimenting with uses of that code. However, given his past comments on the digital currency specifically, it’s surprising JPMorgan would be moving forward with plans to allow clients to trade in it through the bank.

The New York-based bank’s deliberations were reported earlier by the Wall Street Journal. Exchange operator Cboe Global Markets Inc. is competing with CME Group to introduce bitcoin futures.

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