Large banks are not in a hurry to facilitate investments in the first Bitcoin futures market on Sunday. Citigroup Inc. and Bank of America Merrill Lynch told their clients that they would not provide access to futures Bitcoin on Sunday, according to The Wall Street Journal.
Goldman Sachs Group Inc., which is the largest US futures broker, will only provide access to satisfied clients. ABN Amro Group, likewise, will occupy the trades for a select group of customers. Societe Generale SA and Morgan Stanley have not completed their boarding, according to experts interviewed on Thursday.
Banks Play The Key Role
For several investors, banks play a crucial role in securing access to new markets.
The hesitation of banks could compromise the short-term launch of bitcoin futures, which cryptocurrency lawyers consider as a critical step in the evolution of cryptocurrency. Cboe Global Markets Inc. plans to launch bitcoin futures on Sunday less than two weeks after the regulators approved the launch. CME Group Inc., also in Chicago, will start futures contracts on December 18th.
Cboe has not published a list of banks that will deal with its futures contracts, noting confidentiality, but said the contracts would be launched as planned. Bitcoin exceeded 16,000 USD on Thursday, and 4,000 USD gain in one day.
The Wall Street Faces Elections
Bitcoin’s growth has made it very hard for many Wall Street to ignore it, despite concerns about its ties to illegal activities and its peculiar legal status. Banks want to control their risks, but they can not ignore the interest of investors.
A merchant must open a brokerage account that could be responsible for losses. Many brokers are fighting with a way to manage the risks of futures because of its volatility. Banks serve as a buffer to counterparties in their role as short-term brokers.
Brokers, assessing Bitcoin futures, need to consider their dealing’s with customers and decide whether they should charge higher fees for trading backstop futures. Here is a difficult task is given the volatility of Bitcoin.
Exchanges set a minimum margin requirement; traders must post money to join a futures bet. Therefore, transactions faced the same challenge. Cboe said Monday that the clearinghouse raised the minimum from 33% to 44% due to the volatility of the bank in recent days. Minimum CME is 35% on contracts. And the exchange could adjust this level in reply to instability, said a CME spokesman.
A hedge fund Typhon Capital Management, will trade Cboe’s futures in one of its resources. James Koutoulas, a CEO, stated that only three of the 12 fund brokers had approved the deal to purchase bitcoin futures.
Bank customers include institutional investors and more significant hedge funds. So members may find it difficult to access the future of Cboe, which would undermine commercial activity on Cboe’s new market, declared Craig Pirrong, a professor at the University of Houston.
Tiny Brokers See The Opportunity
The repulsion of individual banks has created an opportunity for tinier brokers such as Wedbush Securities Inc. and Phillip Capital Inc., to provide access to Bitcoin futures.
Bob Fitzsimmons, Wedbush’s Chief Executive Officer, said that this window had created an opportunity for customers that the company has courted for several months.
Interactive Brokers Group Inc. Will give customers entrance to Cboe’s futures contracts for long traders who bet on a rise in prices, according to Thomas Peterfly, CEO. That would protect brokerage if futures Bitcoin contracts would increase and cause possible losses among with small traders who are betting on a fall in prices.
A spokesman for Goldman Sachs said that given that Bitcoin futures are a new product, the company carries out due diligence.
Brokers Group is worried
FIA, which represents large futures brokers, stated that he is concerned about the risk of Bitcoin futures on the stock.
Also, FIA told CFTC that the regulative agency did not allow adequate public transparency and contribution to the examination of Cboe and CME Bitcoin futures contracts.
A CFTC spokesman declared the agency agrees that Bitcoin is a product not like any other committee has approached.