Derivatives Giant CME Group Unveils Benchmarks for Bitcoin Traders

Derivatives marketplace CME Group and Crypto Facilities have unveiled two bitcoin benchmarks designed to give investors a new way to hedge.

May 2, 2016 at 4:30 p.m. UTC
Updated Sep 11, 2021 at 12:15 p.m. UTC

Derivatives marketplace CME Group today unveiled two bitcoin benchmarks designed to give investors a new way to hedge.

Built in partnership with London-based Crypto Facilities, the prices for the two benchmarks will be derived from six different bitcoin exchanges – Bitfinex, Bitstamp, Coinbase, Genesis Global Trading, itBit and Kraken – and are designed to be compliant with global regulatory requirements.

The benchmarks can be used as bitcoin price reference points in derivatives that help manage the risk of bitcoin investments.

Speaking with CoinDesk, Crypto Facilities chief operating officer Timo Schlaefer said the benchmarks are designed to give investors a way to create derivatives with an "institutional level of quality".

Schlaefer said:

"I would think that anyone who might be interested in trading bitcoin derivatives, in particular if they offer their product in a regulated manner, should be interested in these benchmarks."

One of the benchmarks is called the CME Crypto Facilities Bitcoin Reference Rate (BRR), which is a once-a-day reference rate on the price of bitcoin in US dollars.

The second benchmark will be calculated by Crypto Facilities and be based on global demand to buy and sell bitcoin aggregated into a consolidated order book.

"These products are designed to allow bitcoin traders, companies and other users to rely on a credible reference rate price source," said Sandra Ro, executive director and digitization lead at CME Group, in a statement.

Regulated bitcoin derivatives

An oversight committee for the BRR comprised of members of the CME Group, Crypto Facilities and Imperial College London will develop a code of conduct for participants and review the practices and standards.

In February 2015, Schlaefer – a former Goldman Sachs trader – launched his own bitcoin derivatives market, Crypto Facilities, authorized and regulated by UK regulatory body, the Financial Conduct Authority.

Importantly, to those looking to create a bitcoin derivatives market on a larger scale, the CME benchmarks are designed to be compliant with the International Organization of Securities Commissions (IOSCO) principles for financial benchmarks.

The two products are planned to launch in the fourth quarter of 2016.

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