German-operated derivatives market Eurex is rumored to soon turn on the futures contract faucet, releasing its own set of cryptocurrency derivative contracts. If true, the first wave of contracts will include Bitcoin, Ethereum and Ripple (XRP) coin future contracts.
Citing people familiar with the development, media outlet The Block Crypto said that the exchange is meeting with market making experts with regards to the product.
Though no official comments have been made by the firm, the move, if true, comes as no surprise seeing how it had set its target on the crypto market since 2017. In 2018, a division was set up for crypto assets and distributed ledger technology. During that period, a Deutsche Börse spokesperson reportedly told German-based news media:
“We are thinking about futures, with which private investors and institutional investors can protect existing investments in bitcoin or set for falling prices of the cyber currency.”
More so, while Deutsche Börse acknowledged the fact that they have been in touch with the space for a while now, it had only been in the “ideation and exploration” phase but will need a “centrally steered approach” for a full-scale expression of the technology in their business.
The future of the crypto derivative market continues to take shape as new players are being introduced joining others in the queue for regulatory approval. Bakkt, Seed CX, and ErisX are among those seeking to introduce new settlement types into the US market – the physical Bitcoin settlements – adding variety to already established market place for crypto futures contract offered by pioneers CBOE and CME.
CBOE also wants to launch an Ethereum futures contract and is only waiting for the approval from the regulatory watchdog. So far, net sentiments from the idea of an Ethereum futures contract have been somewhat positive.
A couple of other cryptocurrency exchanges such as BitMex, CoinFloor, and Binance are already marking their space in the advanced cryptocurrency market to suit sophisticated investors. As the industry continues to mature, perhaps the market will take a complete semblance to that of the traditional financial market and may appeal to more mainstream traders and investors. Although regulation may be pivotal to this development, the CFTC has a workaround on how to allow the exchanges self-regulate in line with the stipulated financial laws, as an interim approach before a more constituted legal infrastructure is in place.
Moreover, the major contention lies in the security of services provided – the custody infrastructure and market monitoring instruments – constituting major impediments to the launch of other derivate market classes like the Bitcoin ETF, which has had many of its proposals declined or for many months under review by the Securities and Exchange Commission (SEC).
Nonetheless, it behooves any financial service operator willing to engage in this emerging market class to do a proper groundwork before launching any product into the market. As there are currently a few products, yet only a handful of institutional investors have dipped a foot in the water, although this number may be increasing steadily, still it only proves that a more comprehensive market infrastructure may be the only key to unlock the market for a full-scale adoption by institutions.
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