CME CME Group Inc

By Gabriel T. Rubin 

WASHINGTON -- The top U.S. derivatives regulator on Monday provided guidance to exchanges and clearinghouses that want to list cryptocurrency products, responding to industry concerns about the vetting process for new derivatives contracts like bitcoin futures.

The advisory from the Commodity Futures Trading Commission focuses on a set of best practices for launching cryptocurrency derivative contracts. It says exchanges should have the ability to monitor underlying cryptocurrency spot markets, have a plan for coordinating with federal regulators, and reach out to market participants to solicit comments on a pending contract launch.

"As the virtual currency market continues to evolve, CFTC staff will seek to provide additional guidance to help market participants keep pace with innovation while complying with CFTC regulations," the agency's division of market oversight director, Amir Zaidi, said in a statement.

CME Group Inc. and Cboe Global Markets Inc. launched separate bitcoin futures contracts in December, after limited consultations with the CFTC. Bitcoin's volatility and worries about bitcoin exchanges' lack of transparency and cyber vulnerability have caused some on Wall Street, including the Futures Industry Association, to call on the CFTC to take a harder look at virtual currency derivatives before allowing them to come to market.

Bitcoin futures have so far behaved like many other new contracts, without pronounced price volatility and limited but growing liquidity. A Federal Reserve Bank of San Francisco study found that the launch of bitcoin futures in December led to a steep drop in the price of bitcoin, since it allowed "pessimists" to have a say in the market as opposed to just investors who were bullish on bitcoin.

Write to Gabriel T. Rubin at gabriel.rubin@wsj.com

(END) Dow Jones Newswires

May 21, 2018 20:30 ET (00:30 GMT)

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