CFTC Issues Guidelines For Offering Cryptocurrency Derivatives
In consultation with Chicago Mercantile Exchange and the CBOE Futures Exchange, the US CFTC (Commodities and Futures Trading Commission) has issued additional guidelines to financial institutions planning to cryptocurrency based derivative products.
The regulator has raised two concerns with regard to cryptocurrency derivative offerings. The first concern is
“virtual currency platforms present heightened concerns about potential impacts on CFTC-regulated markets, including potential market manipulation, because they lack the transparency and robust regulation as U.S. derivatives platforms.”
The second concern is the difficulty in determining the margin requirement for derivatives contracts as assessing the inherent risk of cryptocurrency is not easy due to high volatility. So, according to CFTC, exchanges may find it difficult to precisely set the margin requirements.
The guidelines recommends platforms, which offer cryptocurrency derivatives, to keep in touch with the Commission staff and discuss issues related to
“the surveillance of virtual currency derivatives contracts, and provide surveillance information as requested by Commission staff.”
The CFTC staff worked together with the CBOE and CME exchange executives and reviewed the derivative contracts presently offered, before preparing the guidelines.