Why the founder of Interactive Brokers is afraid of bitcoin futures
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Bitcoin futures contracts that Cboe Global Markets (a US company that owns CBOE, as well as the operator of stock exchange operator BATS Global Markets) and CME Group (the largest North American financial derivatives market) are hoping to include in the listing at the end of this year, can complete it was beyond the power of the financial crisis: to destroy many trading companies and to create a threat to the stability of the Wall Street clearing units.
No financial product present on the stock exchange has ever caused such cataclysms, but Thomas Peterffy, one of the most successful derivatives traders, is concerned that bitcoin derivatives will bring such extraordinary volatility to the markets that it will be difficult to contain. “First of all, I’m seriously scared,” said Peterffy, founder and chairman of the Interactive Brokers Group (ticker: IBKR).
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The head of JPMorgan Chase (JPM), Jamie Damon, and the head of BlackRock (BLK) Lawrence Fink are worried that Bitcoin is a bubble and a best friend of money launderers. Peterffy cares a bit differently: he fears that low marginal rates will stimulate speculation, threatening trading and clearing companies.
Marginal futures rates range from 2% to 8%. When an investor’s losses go beyond these limits, the broker must immediately cover them and then receive funds from the client. This year, Bitcoin traded from about $ 708 to almost $ 7,400. He can go higher or collapse 70% intraday. It is also very difficult to analyze its price, since Bitcoin does not have economic functionality, unlike goods such as grain or S & P 500 index futures.
Peterffy worries that small trading firms will offer the lowest marginal rates to attract businesses, thus becoming the weakest link in protecting the market from risks similar to those created by various products that monitor the volatility index CBOE (VIX). Many investors are confident that the VIX will remain low. Such a rate can lead to disaster if volatility suddenly jumps and stocks collapse.
“The weakest clearing members risk the least. In any case, they will not lose a little money and more than they have. For this reason, the main share of Bitcoin contracts will be among the weakest clearing members, which will fall in the event of a big jump, ”says Peterffi.
Peterffy wants CME and Options Clearing Corporation (the American clearing house located in Chicago) to limit liability between clearing members to $ 100 million for Bitcoin futures. He also wants to isolate Bitcoin from other financial products, a step, he said, that has already been taken for some volatile products. Interactive Brokers will offer Bitcoin futures trading, if these conditions are met, and will consider stopping the business with some firms otherwise.
CME, Cboe (CBOE), and OCC do not comment on this, merely stating that the risks of Bitcoin futures are manageable.
Bitcoin futures demonstrate the various aspects of the challenges facing the American exchanges. Previously, markets were a place where companies managed risk or attracted capital. Now, stock-oriented exchanges are actually very fast computer systems built to attract high-frequency traders and quanta. Commodity exchanges, such as CME, depend on trading volumes.
The exchanges have never dealt with something that is just as much arousing the public's imagination as Bitcoin. So while banks, such as the Goldman Sachs Group (GS), report that customers are not interested in trading in stocks, bonds and derivatives, the exchanges should chase Bitcoin. Trading fees can be huge if the Commodity Futures Trading Commission allows Cboe and CME to list Bitcoin futures.
The situation should alert the derivatives industry, which is fighting for widespread recognition. “Investors want to invest millions, tens of millions and hundreds of millions in Bitcoin,” says Vincent Ayu, portfolio manager at Gondor Capital’s hedge fund, “besides, people are scared of options.”
As already mentioned, Wall Street is developing new financial tools throwing ideas into the wall, and trading everything that will stick. Bitcoin futures, if Peterffi is right, can smash the wall.
Bitcoin futures contracts that Cboe Global Markets (a US company that owns CBOE, as well as the operator of stock exchange operator BATS Global Markets) and CME Group (the largest North American financial derivatives market) are hoping to include in the listing at the end of this year, can complete it was beyond the power of the financial crisis: to destroy many trading companies and to create a threat to the stability of the Wall Street clearing units.
No financial product present on the stock exchange has ever caused such cataclysms, but Thomas Peterffy, one of the most successful derivatives traders, is concerned that bitcoin derivatives will bring such extraordinary volatility to the markets that it will be difficult to contain. “First of all, I’m seriously scared,” said Peterffy, founder and chairman of the Interactive Brokers Group (ticker: IBKR).
')
The head of JPMorgan Chase (JPM), Jamie Damon, and the head of BlackRock (BLK) Lawrence Fink are worried that Bitcoin is a bubble and a best friend of money launderers. Peterffy cares a bit differently: he fears that low marginal rates will stimulate speculation, threatening trading and clearing companies.
Marginal futures rates range from 2% to 8%. When an investor’s losses go beyond these limits, the broker must immediately cover them and then receive funds from the client. This year, Bitcoin traded from about $ 708 to almost $ 7,400. He can go higher or collapse 70% intraday. It is also very difficult to analyze its price, since Bitcoin does not have economic functionality, unlike goods such as grain or S & P 500 index futures.
Peterffy worries that small trading firms will offer the lowest marginal rates to attract businesses, thus becoming the weakest link in protecting the market from risks similar to those created by various products that monitor the volatility index CBOE (VIX). Many investors are confident that the VIX will remain low. Such a rate can lead to disaster if volatility suddenly jumps and stocks collapse.
“The weakest clearing members risk the least. In any case, they will not lose a little money and more than they have. For this reason, the main share of Bitcoin contracts will be among the weakest clearing members, which will fall in the event of a big jump, ”says Peterffi.
Peterffy wants CME and Options Clearing Corporation (the American clearing house located in Chicago) to limit liability between clearing members to $ 100 million for Bitcoin futures. He also wants to isolate Bitcoin from other financial products, a step, he said, that has already been taken for some volatile products. Interactive Brokers will offer Bitcoin futures trading, if these conditions are met, and will consider stopping the business with some firms otherwise.
CME, Cboe (CBOE), and OCC do not comment on this, merely stating that the risks of Bitcoin futures are manageable.
Bitcoin futures demonstrate the various aspects of the challenges facing the American exchanges. Previously, markets were a place where companies managed risk or attracted capital. Now, stock-oriented exchanges are actually very fast computer systems built to attract high-frequency traders and quanta. Commodity exchanges, such as CME, depend on trading volumes.
The exchanges have never dealt with something that is just as much arousing the public's imagination as Bitcoin. So while banks, such as the Goldman Sachs Group (GS), report that customers are not interested in trading in stocks, bonds and derivatives, the exchanges should chase Bitcoin. Trading fees can be huge if the Commodity Futures Trading Commission allows Cboe and CME to list Bitcoin futures.
The situation should alert the derivatives industry, which is fighting for widespread recognition. “Investors want to invest millions, tens of millions and hundreds of millions in Bitcoin,” says Vincent Ayu, portfolio manager at Gondor Capital’s hedge fund, “besides, people are scared of options.”
As already mentioned, Wall Street is developing new financial tools throwing ideas into the wall, and trading everything that will stick. Bitcoin futures, if Peterffi is right, can smash the wall.
Source: https://habr.com/ru/post/342502/
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