CFTC issues guidance for listing cryptocurrency derivative products

The regulator identifies key areas that ‘require particular attention’ by firms planning to offer virtual currency derivative contracts

CFTC issues guidance for listing cryptocurrency derivative products

The US Commodity Futures Trading Commission (CFTC) has published a joint staff advisory providing guidance for exchanges and clearinghouses planning to list virtual currency derivative products. The advisory was issued jointly by the CFTC’s Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR).

In a press release, published on Monday, the regulator said that the advisory focuses on several “key areas” that “require particular attention in the context of listing a new virtual currency derivatives contract”. These areas include market surveillance, coordination with the CFTC staff, large trader reporting, outreach to member and market participants and risk management and governance.

“The CFTC staff is committed to providing regulatory clarity as much as possible,” DMO director Amir Zaidi said in a statement. “As the virtual currency market continues to evolve, CFTC staff will seek to provide additional guidance to help market participants keep pace with innovation while complying with CFTC regulations.”

Meanwhile, DCR Director Brian Bussey said that the guidance was aimed at helping market participants risk management programmes that address new risks imposed by digital currency products.

“In addition, the guidance is designed to help ensure that market participants follow appropriate governance processes with respect to the launch of these products,” Bussey added.

According to the press release, the new guidance is furthering the CFTC’s efforts to regulate the nascent market, without stifling innovation in the sector. So far the regulator has approved cryptocurrency-related derivative products by a handful of companies, most notably Cboe Global Markets and CME Group, which launched Bitcoin futures products in December.  

Last week, CME and British digital asset trading service Crypto Facilities launched an Ethereum (ETH) reference rate and a real-time Ethereum-dollar index. Crypto Facilities already provides a similar reference rate for CME’s Bitcoin futures offering and recently launched the first regulated ETH futures contracts in the UK. As noted by industry website Coindesk, the new reference rates may be hinting that CME is considering launching an ETH futures product.

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