New Investment Vehicle: Ether/Bitcoin Ratio Futures
CME Group, the world’s leading derivatives marketplace, has announced its plans to launch Ether/Bitcoin Ratio futures on July 31, pending regulatory review. This move comes as the hype around a spot Bitcoin exchange-traded fund starts to fade. The cash-settled price for this investment vehicle will be determined by dividing the final settlement price of CME Group’s Ether futures by the corresponding final settlement price of Bitcoin futures.
Meeting Investor Demands
According to Giovanni Vicioso, the Global Head of Cryptocurrency Products at CME Group, the new Ether/Bitcoin Ratio futures will allow investors to capture exposure to both digital assets in a single trade. This eliminates the need for investors to take a directional view and provides relative value trading opportunities. It also creates an efficient and cost-effective way for investors to hedge their cryptocurrency holdings or execute various trading strategies.
Enhancing Market Liquidity and Efficiency
The launch of Ether/Bitcoin Ratio futures completes the currency triangle, enabling market makers like XBTO to arbitrage synthetically. Paul Eisma, Head of Options Trading at XBTO, believes that CME Group’s innovative product will increase volumes, reduce spreads, and offer institutional crypto market participants a vehicle to express relative value between Bitcoin and Ether. The addition of this new futures contract further demonstrates CME Group’s commitment to meeting the demands of both retail and institutional investors.
CME Group’s Expansion in the Digital Asset Space
CME Group has been steadily expanding its suite of digital asset products over the past year. In September 2020, the company announced its intention to launch options trading for Ether futures. It later revealed plans to introduce Euro-denominated Bitcoin and Ether futures as regulated options for institutional investors. In March, CME Group launched Bitcoin futures events contracts, while in May, it introduced new options contracts for Bitcoin and Ether futures with daily expirations.
Advancement in Cryptocurrency Derivatives
Brooks Dudley of Marex Capital Markets, Inc., highlights the significance of this new ETH/BTC cross-cryptocurrency contract from CME Group. It allows investors greater flexibility in hedging positions in non-dollar offshore markets and represents another important advancement in CFTC-regulated cryptocurrency derivatives.
