Cryptocurrency and the CME

The Chicago Mercantile Exchange (CME) has recently announced that it will begin listing cryptocurrency-related futures. As the nation’s largest financial products exchange, this will have a massive impact on the viability of trading in blockchain-based currencies such as Bitcoin, particularly when it comes to adherence to federal regulations and affording protections to traders.

Hart David Carson, assists those looking to trade in Bitcoin and other cryptocurrencies on the CME. We can provide you with sound legal guidance as well as experienced advice born from a solid background in investing and trading commodities.

The CME and the BRR

One way in which CME Group lends viability to trading in virtual currencies is in calculating the Bitcoin Reference Rate (BRR) in tandem with Crypto Facilities Ltd. This rate provides a rate of how much each bitcoin costs in U.S. dollars, and they publish it each day. The BRR has been used by investors and financial institutions worldwide as a reliable benchmark for bitcoin pricing.

The BRR is calculated by taking pricing information from various bitcoin exchanges and combines them together to create an aggregate score. This provides traders with an effective, reliable way to assess the going price of Bitcoin and make purchase and sale decisions accordingly. The processes used to calculate the rate also include various failsafe mechanisms to ensure up-to-date information.

In addition to the BRR, CME group also provides the Bitcoin Real Time Index (BRTI) which provides a to-the-minute estimate of the going rate of bitcoin.

CME Regulations and Rules

The CME has used the BRR as a reference point for calculating the price of virtual currency futures on their exchange. In addition, the products they provide adhere to their strict rules and regulations. For instance, anyone interested in buying or selling Bitcoin on the exchange must sign a Market Data License Agreement (MDLA) in order to be licensed in their bitcoin products.

In addition, the CME has various prohibitions and regulations in place to prevent specious trading practices, including wash trades, money-passes, settlement manipulations, trading ahead of customer orders, and noncompetitive trades. Their investigators use market surveillance and other forms of data to detect these practices and enforce their rules.

These regulations are intended to provide a fair trading environment for investors and traders, and this can be a massive benefit to those looking to invest in Bitcoin since it ensures reliable and equitable pricing and practices—more than can be said about some cryptocurrency exchanges.

Adherence to CME Regulations

When trading on the Chicago Mercantile Exchange, you will need to make sure your own practices are within the realm of what they permit. Otherwise, you’ll likely face disciplinary action on the part of the CME, which will take the form of arbitration.

To ensure regulatory compliance and secure legal assistance in the event that you face a dispute when trading in cryptocurrency-based commodities, contact the attorneys at Hart David Carson. We’ll give you sound legal guidance when it comes to structuring your trading practices and represent you should you happen to face arbitration. 

To learn more or schedule a free consultation, contact us today.