DERIVATIVES-CBOE and Gemini strike bitcoin data agreement

LONDON, Aug 2 (IFR) - CBOE Holdings has entered into a agreement with cryptocurrency exchange Gemini for bitcoin data that will support the Chicago bourse’s plans to list bitcoin derivatives.

The multi-year agreement sees Gemini, which was founded by Cameron and Tyler Winklevoss, provide daily bitcoin auction values to the exchange giant. The data will support the development of CBOE’s cash-settled futures that are slated for launch on the bourse’s CFE futures exchange in the fourth quarter of 2017 or early 2018, pending a review by the Commodity Futures Trading Commission.

The agreement also provides CBOE with exclusive rights to use Gemini market data for the creation of new indices. That could extend to VIX-style indices that would provide a measure of volatility on the cryptocurrency and potential volatility trading opportunities if a liquid bitcoin options market were to emerge.

Interest in the cryptocurrency has increased alongside a near-tripling of bitcoin’s value since the start of the year. The currency hit an all-time high of US$2,954 in mid-June. Trading volume has grown substantially over the last five years as market capitalisation of outstanding bitcoin tokens jumped from under US$1bn to almost US$50bn. The currency represents around half of the entire cryptocurrency market, which has around US$100bn, outstanding according to CBOE.

Performance defies a setback in March, when the SEC rejected an application from the Winklevoss twins - most noted for their high-profile bust-up with Mark Zuckerberg over the origins of Facebook - to list exchange-traded funds linked to the digital currency on the BATS exchange.

The agreement with CBOE, which acquired BATS earlier this year, could help to allay some concerns around the unregulated nature of the cryptocurrency market - cited by the SEC in its ETF rejection.

Gemini is regulated by the New York State Department of Financial Services. With limited liability trust company status, it has a legal obligation to protect the interest and assets of customers.

“Gemini’s key concerns in the cryptocurrency ecosystem have always been security, compliance, and regulatory oversight. By working with the team at CBOE, we are helping to make bitcoin and other cryptocurrencies increasingly accessible to both retail and institutional investors.” Gemini CEO Tyler Winklevoss said in a statement.

According to Ed Tilly, CBOE’s chairman and CEO, the bourse’s broad focus on options, derivatives, VIX, ETFs and FX makes it a natural home for the development and trading of bitcoin futures.

“We very much look forward to responding to the growing interest in cryptocurrencies through the creation of bitcoin futures traded on a regulated derivatives exchange, with the many expected benefits that this brings, including transparency, price discovery, deep liquidity and centralised clearing,” he said in a statement. (Reporting by Helen Bartholomew)