Cboe Digital welcomes CFTC’s approval of margin futures trading

Rick Steves

The new margin model will require only a percentage of the total posted as collateral, enabling customers to trade futures in a less capital-intensive way. Trades will be executed and cleared through an approved set of member Futures Commission Merchants (FCMs) with Cboe Digital’s clearinghouse acting as the central counterparty.

Cboe Digital has become the first U.S.-regulated crypto native exchange and clearinghouse combination platform to offer leveraged derivatives products. The initial product launch will include physically and financially settled Bitcoin and Ether contracts in the second half of 2023.

The announcement follows the recent approval from the Commodity Futures Trading Commission (CFTC) to expand its product offering to include margined futures contracts.

A U.S. regulated crypto marketplace that welcomes intermediaries

John Palmer, President of Cboe Digital, said: “We are grateful to the CFTC for working with us as we continue to build out our vision for a transparent, U.S. regulated crypto marketplace that welcomes intermediaries. Derivatives are a time-tested and valuable tool that enable investors to gain market exposure and manage their risk.”

The regulator approved Cboe Digital’s vision to bring trust and transparency to crypto spot and derivatives markets under an intermediary-inclusive model.

Cboe Digital to date has offered trading and clearing of Bitcoin and Ether futures on a fully collateralized basis, which require customers to outlay the full amount of a futures contract upfront.

The new margin model will require only a percentage of the total posted as collateral, enabling customers to trade futures in a less capital-intensive way. Trades will be executed and cleared through an approved set of member Futures Commission Merchants (FCMs) with Cboe Digital’s clearinghouse acting as the central counterparty.

At Cboe Digital, market participants can trade spot and margin futures on the same platform, which fills a key gap in the US landscape, and brings greater cost and operational efficiencies to enhance customers’ trading experience. In addition to margin futures, Cboe Digital’s spot market supports trading in Bitcoin, Bitcoin Cash, Ether, Litecoin, and USDC.

Cboe Digital’s 13 partners

Cboe Digital, which joined FIA’s industry standards body to help build out a proper and robust ecosystem for the crypto assets, has recently welcomed 13 participants as minority owners of its unique syndicate structure. The list of investors includes retail and institutional intermediaries, liquidity providers, and brokers.

B2C2, DRW, Galaxy Digital, GSR, Hidden Road, IMC, Interactive Brokers, Jane Street, Jump Crypto, Robinhood, Susquehanna International Group, tastyworks, and Virtu Financial, are the 13 minority investors and share the same message and mission: to grow a  transparent, centralized and fully-regulated exchange and clearing house in the US that they’re used to seeing in other asset classes.

In a recent interview with FinanceFeeds, Cboe Digital President John Palmer said the firm is still working with the 13 investor firms to shape and add value to the ecosystem. Cboe Digital is looking to add greater competition, choice, and liquidity to the US marketplace for crypto futures, and is working with and awaiting approval from the CFTC  to launch margin futures trading for crypto. With a unified spot market, Cboe Digital will be the first U.S. exchange where participants can more efficiently engage in crypto basis trading, a form of arbitrage trading that allows traders to take advantage of price discrepencies in the spot and futures markets of the same commodity. Cboe Digital potentially plans to also launch crypto options in the future, Palmer added.

CFTC’s Romero explained why Cboe gets nod while others were rejected

Earlier this week, CFTC Commissioner Christy Goldsmith Romero explained the approval of Cboe to expand its clearing of futures contracts on crypto assets after having requested additional measures for critical risk mitigation.

Cboe’s application stands in stark contrast to FTX’s for a bespoke disintermediated direct-to-customer market structure, she said. “The proposed FTX model was never adopted by the Commission, but it put at risk customers’ bankruptcy priority, other customer protections, and financial stability.”

Cboe’s application also differs from other registrants and applicants that have proposed bespoke market structures that could introduce financial stability risk and other risks, CFTC’s Romero added. “Cboe does not seek bespoke regulation that differs from the time and stress-tested traditional market structure. CBOE’s amended Order provides fair competition, without opening the door to novel and complex risks that could flow from an untested market structure.

“Additionally, Cboe’s clearinghouse itself has been registered with the Commission since 2019, and its parent company Cboe has more than fifty years of experience operating exchanges across regulated futures, options, foreign exchange, and equities exchanges. This experience can further serve to limit risk with the financial and human capital, as well as risk management expertise, that Cboe has in executing the responsibilities associated with regulated trading and clearing in other asset classes. Finally, in connection with seeking the expanded authority under the Order, Cboe has agreed to hold itself to a higher financial-resources standard than the law requires. This recognizes the heightened risks associated with clearing in a nascent marketplace, like crypto, and acts to limit risk”.

To conclude, CFTC’s Romero said that too often in recent years, crypto firms have sought to take a business model or market structure that exists in an unregulated environment and port it over to the regulated environment, and Cboe has not done that. Instead, it operates within the parameters of the traditional futures market structure and regulatory framework.

Read this next

Digital Assets

TYRION Advances Decentralized Advertising with Strategic Move to Coinbase’s Base Chain

In a game-changing partnership, decentralized advertising pioneer TYRION integrates with Coinbase’s Base Chain, marking a synergistic leap towards transparent, efficient, and innovative digital advertising solutions in a future driven by blockchain.

Institutional FX

FXSpotStream reports highest ADV in six months

Trading volumes on institutional FX platforms surged in September as traders increased their bets on central bankers’ policy with evidence mounting that inflation and economic growth are not yet losing momentum.

Digital Assets

Coinbase makes major push into Singapore with MPI license

Cryptocurrency exchange Coinbase has secured a Major Payment Institution (MPI) license from the Monetary Authority of Singapore (MAS).

Retail FX

Begin Your Trading Journey by Learning How to Use Trading 212

In the upcoming content, the process of getting started with Trading 212 is explored, from registration and choosing account types to the benefits of connecting with Traders Union.

Institutional FX

Cboe reports +10% increase in monthly FX volumes

Cboe’s institutional spot FX platform today announced its trading volume for the month ending September 2023, which showed resurgence in activity following two consecutive months of reduced trading volumes.


Muinmos integrates TConsult’s Investor Self-Declaration platform into client onboarding platform

“Given the increasing regulatory demands, our clients have eagerly anticipated this integration. Partnering with TConsult, one of the industry’s foremost tax experts, allows us to offer a comprehensive solution. By embedding digital tax certifications into our onboarding processes, we provide a more efficient, risk-mitigated approach to client initiation.”


TS Imagine taps Cassini Systems’ pre-and post-trade margin and collateral analytics

“Joining forces with Cassini allows us to offer a single, integrated system that provides in-depth analytics, streamlining operations for investment and risk management teams. This collaboration stands to significantly benefit our clients in the ever-evolving market landscape.”

Retail FX

XTB launches fractional shares offering in the UK

“The roll-out of Fractional Shares has made capital markets even more accessible for UK investors. Having observed the positive reception to our Fractional Shares in other European regions, we’re confident that this addition fortifies our competitive stance in the UK, positioning XTB as a go-to destination for a diverse range of investors.”


Baton Systems launches DLT-powered post-trade solution Core-Payments ahead of T+1

“With the transition to T+1 now just months away, and with regulators growing increasingly vocal around the need for greater settlement control and supervision, it is paramount that market participants ensure they are fully prepared to cope with any rise in settlement risk