@$47670: CME Group Rolls Out Micro Bitcoin, Ether Options to Up Crypto Exposure

The Chicago Mercantile Exchange (CME) Group, a leading derivatives marketplace, expanded its suite of derivative offerings on Monday by launching micro-sized Bitcoin and Ether options to cover more participants in the cryptocurrency market.

This comes two months after the security and commodity exchange company announced that it would launch a 20-year bond future to help investors better manage their US treasury curve exposure.

The new options complement CME Group’s diverse slate of more than 20 micro products that have traded more than 1.2 billion contracts since their introduction, the company said.

Goals of the New Options

Tim McCourt, the Global Head of Equity and FX Products at CME Group, said the additions build on the significant growth and liquidity the company has seen in its micro Bitcoin and Ether futures.

“Sized at one-tenth of their respective underlying tokens in size, these contracts will offer a wide range of market participants, from institutions to sophisticated, active, individual traders, greater flexibility and precision to manage their exposure to the top two cryptocurrencies by market capitalization,” McCourt added.

Robert Bogucki, the Managing Director and Global Co-Head of Trading at Galaxy Digital Holdings Limited, said the options are an important step in the development of a thriving marketplace for institutions and sophisticated investors who want crypto exposure in a regulated environment.

“The smaller contract sizes will give investors and traders greater flexibility in managing their exposure to the two biggest cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the networks which are used to authenticate blockchain technology. Cryptocurrencies can be thought of as systems that accept online payments which are denoted as “tokens.” Tokens are represented as internal ledger entries in blockchain technology while the term crypto is used to depict cryptographic methods and encryption algorithms such as public-private key pairs, various hashing functions, and an elliptical curve. Every cryptocurrency transaction that occurs is logged in a web-based ledger with blockchain technology.These then must be approved by a disparate network of individual nodes (computers that maintain a copy of the ledger). For every new block generated, the block must first be authenticated and confirmed ‘approved’ by each node, which makes forging the transactional history of cryptocurrencies nearly impossible. The World’s First CryptoBitcoin became the first blockchain-based cryptocurrency and to this day is still the most demanded cryptocurrency and the most valued. Bitcoin still contributes the majority of the overall cryptocurrency market volume, though several other cryptos have grown in popularity in recent years.Indeed, out of the wake of Bitcoin, iterations of Bitcoin became prevalent which resulted in a multitude of newly created or cloned cryptocurrencies. Contending cryptocurrencies that emerged after Bitcoin’s success is referred to as ‘altcoins’ and they refer to cryptocurrencies such as Bitcoin, Peercoin, Namecoin, Ethereum, Ripple, Stellar, and Dash. Cryptocurrencies promise a wide range of technological innovations that have yet to be structured into being. Simplified payments between two parties without the need for a middle man is one aspect while leveraging blockchain technology to minimize transaction and processing fees for banks is another. Of course, cryptocurrencies have their disadvantages too. This includes issues of tax evasion, money laundering, and other illicit online activities where anonymity is a dire ingredient in solicitous and fraudulent activities. Read this Term in the world, opening the market up to new participants. Galaxy Digital is excited to act as a liquidity provider for these options and other CME Group cryptocurrency products,” Bogucki explained.

On his part, Steve Sanders, the EVP of Marketing and Product Development at Interactive Brokers, said the company is excited to add the new offerings to the wide range of global products currently on its platform.

“We continue to see interest in cryptocurrency exposure from our active trader and institutional investor clients. CME Group’s Micro Bitcoin and Micro Ether options will certainly benefit our clients seeking enhanced flexibility to participate in cryptocurrency markets with less upfront cost,” Sanders added.

Derek Devens, the Senior Portfolio Manager, Options Group, at Neuberger Berman, expressed his company’s excitement at the new offerings, adding that the options will better align with the average crypto investor’s exposure.

Devens added: “We expect the pioneering exchange-traded, centrally cleared offering will appeal to over-the-counter cryptocurrency options market participants and facilitate increased market liquidity Liquidity Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client. Liquidity is at the core of every broker’s offering. It is a basic characteristic of every financial asset – be it a currency, stock, bond, commodity or real estate. The more liquid an asset is, the easier it is to sell and buy on the open market. Foreign exchange is considered to be the most liquid asset class.Brokers can source liquidity from a single or multiple source, thereby delivering to their clients enough market depth for their orders to get filled. The main characteristic of liquidity is its depth, which will determine how quickly and how big of an order can be executed via the trading platform.Understanding LiquidityLiquidity can be internal or external depending on the size and the book of the broker. Companies which are large enough and have material client flows consistently are creating their own liquidity pools from the order flow of their clients, thereby internalizing flows and saving on costs to send customer orders to the interbank market. By doing that however they are exposing themselves to carry the risk on the trade.Liquidity providers can be prime brokers, prime of primes, other brokers or the broker’s book itself. Traditionally brokers are split between internalizing flows and offloading trades of their clients to different liquidity providers.Generally, retail brokers and their clients prefer more liquid assets which lead to better fill rates and less slippage. When there is lack of liquidity on a certain market, slippage can occur – the order is executed at a price which is the closest available to the one requested by the client. Read this Term and price stability across cryptocurrency futures and options in U.S. listed markets.”

CME Group’s Recent Growth Posture

Last month, CME Group executed changes in its management team to usher in the next phrase of its growth journey. “As we continue to transform our business, we are restructuring our management team to further sharpen our focus and enhance our ability to achieve our strategic priorities for our clients, shareholders and employees,” Terry Duffy, the Chairman and Chief Executive Officer at CME Group, said.

In its fourth-quarter report for 2021, the company posted 22.5% year-on-year growth in operating income after ending the quarter with a net income of $625.2 million.

In the same period, the company recorded a surge in trading demands as its average daily volume for the final quarter of the year increased by 26 percent year-over-year to 20.5 million contracts.

“We are pleased 2022 is off to a strong start with our highest January average daily volume on record of 24.6 million contracts, led by strong equity index and interest rate volumes,” Duffy had said.