CME Group, a Chicago-based futures exchange, is reportedly preparing to launch Bitcoin spot trading due to its surging demand this year among Wall Street investors, according to a report by the Financial Times.
Although the plan is not yet finalized, it marks a significant move by major Wall Street players into the digital asset space, following the recent approval by the US Securities and Exchange Commission (SEC) of ETFs directly investing in Bitcoin.
Adding spot bitcoin trading to CME, which already offers bitcoin futures trading, would simplify basis trading for investors. Basis trading, a common strategy among professional bitcoin traders similar to practices in the US Treasury market, involves selling futures while simultaneously buying the underlying asset to profit from the price difference. Much of Treausry basis trading occurs on CME platforms.
CME has benefited significantly from the resurgence in institutional interest, surpassing Binance as the world’s leading Bitcoin futures market as traders seek to capitalize on the cryptocurrency’s volatility.
According to the FT report, with approximately 26,000 open positions worth around $8.5 billion on its Chicago market, CME’s potential foray into spot trading would be operated through the EBS currency trading venue in Switzerland, which has robust regulations governing crypto asset trading and custody.
While traditional exchange operators have had varying success in spot cryptocurrency trading, with Deutsche Börse recently launching its digital assets market while CBOE Global Markets announced the closure of its spot market business due to regulatory uncertainties, CME’s move is met with some skepticism.
Some question whether CME can effectively manage two distinct bitcoin trading businesses in Chicago and Switzerland, citing potential efficiency challenges.
However, a significant advantage of CME’s initiative is the increasing comfort among regulated exchanges with infrastructure for trading digital assets, particularly securely storing cryptocurrencies. This could pave the way for exchanges to accept crypto-related collateral, such as tokenized money market funds, for more efficient margin calls.