CME Traders Prefer Cash-Settled Bitcoin Products

Chicago Mercantile Exchange's, or CME, global head of equity index and alternative investment products, Tim McCourt, said traders prefer cash-settled Bitcoin trading over products backed by physical Bitcoin (BTC). 

"So far, clients have expressed a clear preference and priority for a cash-settled product," McCourt told Cointelegraph in an email when asked why the CME chose to go the cash-settled route for its Bitcoin futures trading product back in 2017. 

The CME launched its BTC futures after its price metrics

The CME opened Bitcoin futures trading in 2017, based on the exchange's own CF Bitcoin Reference Rate, or BRR, and Bitcoin Real Time Index, or RTI, released in 2016. Essentially, these two metrics show Bitcoin's average trading price across a number of prominent exchanges at various times — an effort to give the industry clearer pricing for the asset, McCourt said. 

With the cash-backed CME Bitcoin futures product, customers can trade Bitcoin's price action without owning the asset itself, McCourt explained, adding:

CME’s cash settlement mechanism is based off prices determined on several BTC exchanges, in much the same way as the S&P 500 settlement mechanism is based on prices determined at centralized auction markets."

The product caters to customers' strategies 

Customer interest spurred the CME's cash-settled Bitcoin futures product launch as cryptocurrencies gained overall notoriety. "There was a lot of client and crypto community interest in futures to hedge risk or get exposure to Bitcoin prices," McCourt said.

"The introduction of CME Bitcoin futures created a forward curve so investors can better manage that price risk," he added, referring to tactics and strategies traders and investors often use in managing their funds. 

McCourt looks back on an enjoyable experience in opening the CME's Bitcoin futures product — the first of its kind in the crypto space, aside from a similar offering launched by the Chicago Board Options Exchange, or CBOE, in 2017. CME Bitcoin futures continue seeing significant volume, averaging roughly 42,500 BTC traded per day, the CME head said. 

The CME recently posted a number of records for its Bitcoin futures and options trading products, showing the public is anything but disinterested in the exchange's products.