Note from the Publisher: While the Chicago Mercantile Exchange announced a blockchain initiative in late 2015 and also had previously announced its plans to initiate new bitcoin indexes, we were nevertheless EXTREMELY excited to learn that the launches of the latter are now just a week away. The article by our CEO below is a MUST READ and highlights how important we feel this news is. Look for more coverage of the Bitcoin indexes by the FintekNews in the coming weeks and months.
By Bill Taylor, CEO – FintekNews
November 6, 2016
Welcome to the future. The Chicago Mercantile Exchange (CME) is about to launch Bitcoin into worldwide legitimacy. With the introduction of two new products that are set to debut the week of November 13th (the week after this) the way bitcoin is recognized, perceived and eventually traded will usher in the future of a digital currency. As a longtime veteran of the Chicago financial markets and former member of all three Chicago exchanges, I have not been as excited since the S&P 500 Index was created (by the CME) back in the early 80’s. At that time I had one of the first S&P trading accounts at my clearing firm (account A-1) and see the same potential with the new bitcoin products.
So, what are these two new products? Well, here they are in the CME’s own words;
“CME Group and Crypto Facilities (CF) will launch two bitcoin pricing products designed to give CME Group clients a reliable reference rate price source for digital assets.
The pricing data will be disseminated via a streamlined Simple Binary Encoding (SBE) market data feed. This feed will publish the following bitcoin standardized reference rate and real time index pricing data:
- CME CF Bitcoin Reference Rate (BRR), which will provide a final settlement price in U.S. dollars shortly after 4:00 p.m. London time on each trading day.
- CME CF Bitcoin Real Time Index (BRTI), which will allow users real-time access to bitcoin prices.
The BRR aggregates the trade flow of major bitcoin spot exchanges during a specific calculation window into a once-per-day reference rate of the U.S. dollar price of bitcoin.
The BRTI which will be calculated by Crypto Facilities, aggregates global demand to buy and sell bitcoin into a consolidated order book and reflects the real time U.S. dollar price of bitcoin and will be published approximately once every second.”
Think of all that, what it means and what the potential is. First, the CME and Crypto Facilities are creating a worldwide central market place for bitcoin trading. Second, there will be a recognized fixed closing/settlement price giving clarity to what bitcoin is worth at that time (like the London gold fix). Third, there will be a real time index showing live prices of the digital currency available worldwide. Bitcoin (and digital currency) just got “ligit”.
What’s next? Not too far away there will be Bitcoin futures, options on the bitcoin index and futures, new ETF’s with digital currencies and ways to hedge. New fintech innovation, such as smart contracts, direct ledger payments and much more, will be able to facilitate worldwide trade with ease, speedier at lower cost by using a single currency with a worldwide pricing mechanism visual to all.
Obviously there will be many more advantages and applications that will be devised over time. But for now, welcome to the future and thank you CME. Exciting.