The owner of the New York Stock Exchange is set to launch its long-delayed market for bitcoin futures Sunday, a high-profile bet that consumers, businesses and Wall Street will embrace cryptocurrencies.The exchange’s parent company,
plans to open trading of its new bitcoin futures at 8 p.m. EDT. Futures let traders bet on whether an underlying market such as oil, gold, stocks or currencies will rise or fall.
The new futures are part of a venture called Bakkt (pronounced “backed”), whose ultimate goal is to make cryptocurrencies sufficiently transparent and regulated for individuals to use in retail purchases. Bitcoin has failed to gain traction as a tool for payment, in part because of its extreme volatility. If successful, ICE’s futures could make it easier for merchants to protect themselves from swings in bitcoin prices.
Investors in Bakkt include ICE,
’s venture-capital arm and Boston Consulting Group. In addition,
has teamed up with Bakkt to develop ways to let customers convert digital assets into dollars for use at its coffee shops. With the launch, Atlanta-based ICE is challenging its longtime rival,
which introduced its own bitcoin futures in December 2017. More than $200 million worth of CME’s bitcoin futures change hands on an average day. Chicago-based CME said Friday that it would expand into bitcoin options early next year. Historically, exchanges have struggled to attract trading in new futures contracts after similar contracts have taken off elsewhere. But ICE is betting that a novel contract design will draw businesses to its futures. Traders who hold the ICE futures until they expire will either be paid in bitcoin or deliver bitcoin to Bakkt to settle their bets. Such a process, called physical delivery, is used in such markets as cattle, metals and cocoa futures, but it is new to bitcoin. Many traders argue that physical delivery ensures a tight link between futures prices and the price of the underlying market. CME’s bitcoin futures are settled with payments in U.S. dollars, and traders who deal with them don’t have to handle actual digital coins. Bitcoin has more than doubled in value since the beginning of the year and was trading at $10,145 on Friday afternoon. Its rebound is a surprise to many after the collapse of a speculative bubble in bitcoin that peaked in late 2017. “The launch of physically settled futures from Bakkt has been one of the main narratives behind the monster bitcoin rally during the first half of the year,” said
senior market analyst at brokerage firm eToro. Sunday’s debut comes after months of delays. Bakkt initially planned to go live last November, but the rollout was repeatedly pushed back as ICE struggled to get regulatory approval from the U.S. Commodity Futures Trading Commission. One potential problem for Bakkt is that only a handful of clearing firms, which allow traders to access the futures markets, were expected to support the new contract initially.
Goldman Sachs Group
for instance, doesn’t plan to clear ICE’s bitcoin futures, according to a person familiar with the bank’s thinking. Goldman is one of the biggest clearing firms in the futures markets, and it clears CME’s contract for some clients.
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That means traders must use smaller clearing firms willing to provide access to ICE’s bitcoin futures. “It’s provided a good opportunity for us because many of the big banks have shied away from the products,” said
an executive vice president at Wedbush Securities, a smaller firm that plans to support the new contract. Mr. Fitzsimmons said he had brought on more than a dozen clients to trade ICE’s bitcoin futures, including hedge funds and bitcoin miners. Bitcoin miners create new units of the digital currency, and they could use ICE’s contract to protect themselves against the risk of bitcoin’s losing value, much as oil producers use futures to hedge crude prices. Bakkt Chief Executive
said in an interview that there was substantial interest in ICE’s bitcoin futures among clearing firms, and she expected the number of firms clearing the contract to grow over time. Expectations for the launch are high largely because of the reputation of ICE and its CEO,
Since founding ICE in 2000, Mr. Sprecher has built it into an exchange empire worth around $52 billion by making investments in new technologies. A hallmark has been acquiring futures markets with old-fashioned trading floors and turning them electronic.
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“Anyone who’s followed Jeff Sprecher’s career and the trajectory of ICE has to acknowledge that anything he does needs to be taken seriously,” said
a former executive with the New York Mercantile Exchange. Earlier this year, Mr. Sprecher described Bakkt as “a bit of a moonshot bet.” Ms. Loeffler, the head of Bakkt, is a former ICE executive as well as Mr. Sprecher’s wife. Write to Alexander Osipovich at firstname.lastname@example.org
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