According to Coindesk's September 15 report, the Chicago Mercantile Exchange (CME) hopes to keep bitcoin futures traders holding more open positions.
(Source: wikimedia )
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On Thursday, the Chicago Commodity Exchange sent a letter to the US Commodity Futures Trading Commission (CFTC), indicating that it intends to raise the spot monthly position limit for Bitcoin futures contracts.
For individual investors, this cap will rise from 1,000 spot contracts per month to 2,000. Since there are 5 bitcoins per contract, this change means that the trader's maximum risk exposure will double from 5,000 bitcoins (approximately $50 million at current prices) to 10,000 bitcoins ( About 100 million US dollars).
To be sure, given that the number of open positions in July reached an all-time high of around 6,100, there are currently very few traders holding so many open positions.
But the company saw the growth of this market and sought to increase the customer's position on the line, the spokesman said:
This decision is based on significant growth in the bitcoin futures market for financial settlements, investor acceptance, and our analysis of the Bitcoin base market.
Christopher Bowen, managing director and chief regulatory adviser of the Chicago Mercantile Exchange, wrote in a letter that if the US Commodity Futures Trading Commission does not object to the plan, the move will take effect on September 30, 2019 (10 contracts).
The contract ceiling is set to prevent "excessive speculation"
The US Commodity Futures Trading Commission said position limits are designed to prevent "excessive speculation" in any commodity that supports futures products.
There is concern that without these restrictions, excessive speculation by investors about a particular futures contract may result in a sudden large fluctuation in the price of the underlying asset.
The US Commodity Futures Trading Commission website says:
In general, there is no market in the market where manipulation threats or manipulation threats are very low, and no position restrictions are required.
As a result, the Chicago Mercantile Exchange's move on Thursday could be seen as a sign that the bitcoin market is maturing, and it also shows that bitcoin futures contracts are easier for investors to understand than ever before.
Under the plan, investors' monthly holdings will remain at 5,000 contracts, which means that the Chicago Mercantile Exchange will continue to review only those traders who hold positions above this threshold.
The Chicago Mercantile Exchange and the city rival Chicago Board Options Exchange (CBOE) launched cash-settled futures contracts at the end of 2017. However, the Chicago Board Options Exchange announced in March this year that it will close its futures market, making the Chicago Mercantile Exchange the only exchange that offers the product in the US.
Despite this, Intercontinental Exchange, through its ICE Futures US and Bakkt subsidiaries, plans to offer physical settlement futures contracts later this month. Other companies are also seeking to provide physical settlement of futures and forward products.
The spokesman said that the exchange has completed "20 successful settlements". The Chicago Mercantile Exchange currently has a record 56 open interest, with an average daily turnover of 7,100 contracts.
Since the beginning of 2019, more than 1,200 traders have registered on the platform.
The spokesman said:
This is another way we offer our customers, institutional traders and end users, providing additional flexibility for trading and hedging bitcoin price risk.