The Chicago Mercantile Exchange (CME) has announced its intention to double the single position Bitcoin limit for its futures contracts.
According to a letter sent to the Commodity Futures Trading Commission (CFTC), the CME aims to increase the maximum position size from 1,000 contracts to 2,000 contracts.
One contract of a Bitcoin futures market on the CME is worth five Bitcoin. This means that the current maximum size is around $50 million, although the aim is now to double that in the coming months.
At the end of August, Forbes reported that the CME’s average daily volume on its Bitcoin futures market was $370 million. This is still dwarfed by the likes of BitMEX, which regularly sees in excess of $3 billion in daily volume.
However, as institutional interest in Bitcoin has seemingly risen in 2019, the CME wants to extend its limit for traders.
CME Bitcoin Futures Now Average $370 Million In Trading Per Day
"Year-to-date, bitcoin futures are averaging 7,237 contracts per day, which is a 132% increase from the same period last year,"
source: https://t.co/z9Q7PswF6H
— Vortex | CTV / LNHANCE (@theonevortex) September 8, 2019
The CFTC states that positional limits are placed to prevent “excessive speculation” of underlying assets that are tied to a futures product.
“In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low,” the CFTC website states.
With Bitcoin and cryptocurrency markets largely unregulated, it would be a surprise for the CFTC to allow the CME’s request for a limit overhaul. However, if a positive decision is reached, it would almost certainly demonstrate that regulators are warming to digital assets.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.