Bitcoin surges to record above $6,400 after CME announces launch of futures for digital currency

Bitcoins

CME announced Tuesday it plans to launch bitcoin futures in the fourth quarter of the year, pending regulatory review.

CME announced Tuesday it plans to launch bitcoin futures in the fourth quarter of the year, pending regulatory review.

Bitcoin rose to a record high above $6,400 Tuesday morning after the announcement by CME, according to CoinDesk. CME is the world's largest futures exchange.

"Given increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract," Terry Duffy, CME Group Chairman and Chief Executive Officer, said in a statement.

The leading global exchange for options and futures trading is the latest entrant into the business of offering derivatives for bitcoin, the volatile digital currency which is not listed on a major exchange.

The new bitcoin futures contract will be cash-settled and based on the CME CF Bitcoin Reference Rate (BRR), which CME launched in November 2016 with London-based digital trading platform Crypto Facilities. The reference rate is a daily settlement price published at 4 p.m. London time, currently noon ET.

The growth of bitcoin derivatives is also another step towards the development of the digital currency as a more established asset class. Fundstrat's Tom Lee said his call for bitcoin to top $20,000 by 2022 is based partly on expectations that bitcoin derivatives products will launch.

Some sellers of exchange-traded funds have also filed for bitcoin ETFs that track bitcoin futures.

In August, the Chicago Board Options Exchange, the largest U.S. options exchange, said its CBOE Futures Exchange (CFE) plans to offer cash-settled bitcoin futures in the fourth quarter of this year or sometime in early 2018, pending review from the U.S. Commodity Futures Trading Commission. CBOE is working with Gemini Trust, the digital currency exchange founded by brothers Cameron and Tyler Winklevoss, on using Gemini's market data to create bitcoin derivatives and indexes.

The CFTC did not immediately respond to a CNBC request for comment on the CME news.

New York-based digital currency-trading platform LedgerX received the CFTC's approval to clear derivatives in July, and began offering institutional clients the ability to trade bitcoin options two weeks ago. LedgerX CEO Paul Chou told CNBC in an email the company cleared $1 million in the first week and another $2 million in the second week.

Despite the rapid increase, volume is still relatively tiny. Trade Alert, which tracks options data for CBOE, says the comparable figure at the exchange is $2.62 billion a day, including $1.7 billion for S&P 500 index options.

JefferiesAnd the Best Place to Work in the global financial markets 2017 is...

Register for Financial Markets News Alerts