The CME Group, a global derivatives exchange, is set to launch two Asia-focused cryptocurrency reference rates to cater to the derivatives trading needs outside of US business hours. The CME CF Bitcoin Reference Rate APAC and the CME CF Ethereum-Dollar Reference Rate will be published daily at 16:00 Singapore time, starting from September 11.
Enhancing Trading and Risk Management
According to Giovanni Vicioso, the Head of Crypto at CME Group, a significant portion of cryptocurrency trading activity takes place in the Asia-Pacific region outside of US business hours. He noted that Asians account for 11% of all trading during these hours. The introduction of these new reference rates for Bitcoin and Ethereum futures will allow traders to strategically hedge against volatility based on their risk appetite, leveraging the precise timing of publication.
Safeguarding Institutional Confidence
Sui Chung, CEO of CF Benchmarks, emphasized that these new reference rates will complement existing benchmarks like the Bitcoin Reference and Ethereum-Dollar Reference Rates. He highlighted their importance in bolstering institutional confidence in the cryptocurrency sector, stating, “These benchmarks will be calculated and administered to the same exacting standards enjoyed by their existing London and New York counterparts, which have done so much to build investor and institutional confidence in crypto financial products.”
Calculation Method and Data Sources
The reference rates provided by CME Group are derived from the weighted median of cryptocurrency trades across multiple time slots. This approach assigns greater significance to larger cryptocurrency trades within an individual time slot. Prices for these reference rates are sourced from major cryptocurrency exchanges, including Bitstamp, Coinbase, Gemini, itBit, Kraken, and LMAX Digital.
Regulatory and Market Implications
Accurate pricing and reference rates have become central to regulatory discussions, particularly in the context of approving Bitcoin exchange-traded funds (ETFs). Regulatory bodies such as the US Securities and Exchange Commission (SEC) have emphasized the need for precise pricing to ensure the integrity of financial products based on cryptocurrencies. The introduction of reliable reference rates can potentially address some of these concerns and contribute to the broader adoption of cryptocurrency derivatives and investment products.
Innovation Amid Regulatory Landscape
Despite regulatory uncertainties, the cryptocurrency industry continues to evolve and innovate. Purpose Investments’ Bitcoin ETF in Canada, for example, has garnered substantial interest from US investors. Additionally, Cboe Digital has received approval from the US Commodity Futures Trading Commission (CTFC) to offer leveraged margin trading of Bitcoin and Ethereum futures, demonstrating the continued development of cryptocurrency derivatives trading.
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As the industry navigates regulatory challenges and strives for institutional acceptance, initiatives like the introduction of Asia-focused cryptocurrency reference rates contribute to establishing a more mature and reliable trading environment.
