Cboe Receives CFTC Approval to Launch Leveraged Crypto Derivatives

Crypto exchange and clearinghouse Cboe Digital will be able to offer margined bitcoin and ether futures contracts with the approval of the U.S. derivatives markets regulator. This will allow its clients to trade cryptocurrency futures with less collateralized capital upfront.

Cboe Wins Regulatory Nod for Margin Trades on Crypto Futures Exchange

U.S. exchange operator Cboe Global Markets said on Monday that it has been granted regulatory approval by the United States Commodity Futures Trading Commission (CFTC) to offer leveraged derivative products on its Cboe Digital trading platform.

The authorization will permit Cboe to launch physically and financially settled bitcoin and ether margined futures contracts on Cboe Digital in the second half of the year, according to a statement quoted by Reuters and Bloomberg.

Until now, the exchange could offer only fully collateralized trading of crypto futures where users are required to provide the full amount of a contract before trading. Margined trading will allow them to trade while putting up less capital.

“Derivatives are a time-tested and valuable tool that enable investors to gain market exposure and manage their risk,” President of Cboe Digital John Palmer stated. He also pointed out that physical settlement of digital assets will allow traditional financial firms to access bitcoin or ether futures without intermediaries taking custody and emphasized:

That’s where the concept of us also having a spot market has advantages. We didn’t want to have to force participants to custody or touch the physical asset.

CFTC Official Thinks Crypto Firms Should Follow Cboe’s Example

As a regulated crypto exchange and clearinghouse platform, Cboe Digital is currently the only U.S.-registered exchange that allows for both spot and derivatives trading of bitcoin (BTC), bitcoin cash (BCH), litecoin (LTC), the stablecoin USDC, and other digital assets.

In May 2022, Cboe sealed a deal to acquire crypto exchange Erisx, which was later renamed Cboe Digital. In November, the Chicago-based exchange operator revealed that over a dozen firms, including Galaxy Digital and Robinhood Markets, had taken minority equity stakes in Cboe Digital. The platform’s clients are mostly professional or institutional market participants.

The regulatory approval comes at a time of increased regulatory scrutiny on the crypto sector, following negative developments such as the collapse of leading crypto exchange FTX. The latter had also sought CFTC approval to trade in crypto derivatives before it filed for bankruptcy protection.

In a statement on Cboe Digital’s expanded clearing of crypto futures, CFTC Commissioner Christy Goldsmith Romero praised the platform for not doing what others in the industry have been trying to do, namely, take an unregulated business model or market structure and transfer it to the regulated environment.

What do you make of the CFTC’s decision to approve the launch of leveraged crypto derivative products on Cboe Digital? Share your thoughts on the subject in the comments section below.