CBOE, which has the largest share of US options markets, is gearing up to launch options and derivatives on bitcoin, just as the controversial cryptocurrency embarks on its experiment that will help determine its future.
The Chicago exchange on Wednesday agreed an exclusive licencing deal to take bitcoin data from Gemini Trust, the virtual currency exchange run by twin Cameron and Tyler Winklevoss.
The deal comes at a sensitive time for the cryptocurrency, which this week undertook the most significant change in its nine-year history by splitting into two currencies because some users felt transaction volumes increased to unmanagable levels.
Rebel users created a new version of the currency, known as Bitcoin Cash. Over the last five years, the total value of all bitcoin outstanding has grown from less than $1bn to nearly $50bn. The total value of all cryptocurrency tokens outstanding is now approximately $100bn.
Following the split, a divergence of more than $1000 has appeared between the rough market prices for the “core” bitcoin and the new version. The Gemini data the CBOE will use covers the older version of the bitcoin currency.
CBOE and Gemini expect the deal to pave the way for the exchange to launch bitcoin futures contracts by the end of the year, pending regulatory approval. The bitcoin futures will be cleared via the Options Clearing Corporation, the exchange said.
Gemini, which is regulated by the New York State Department of Financial Services, acts as a gateway for users who want to trade bitcoins but also have it linked with a normal bank account. CBOE will retain exclusive rights to use Gemini market data for the creation of new indices, as well as rights to distribute Gemini market data over the options exchange market’s data feeds.
“CBOE is not only a home to options, derivatives and the VIX but also ETF innovations and foreign exchange. This makes us the natural choice for the development and trading of bitcoin futures,” said Ed Tilly, chief executive of CBOE.
Last week LedgerX became the first trading venue and clearing house to be authorised by the Commodity Futures Trading Commission, the US markets regulator, to trade and settle bitcoin derivatives.
Other trading venues are also examining ways to push further into cryptocurrencies such as Ripple and Ethereum, which rely on blockchain technology, the electronic ledger that stores records in shared blocks.