CFTC Issues New Guidance For Cryptocurrency Derivatives Listings

The U.S. Commodity Futures Trading Commission (CFTC), a regulatory watchdog for the derivatives marketplace has recently issued an advisory to crypto exchange operators and clearing houses providing essential guidance on the listing of cryptocurrency derivative products.

The official press release published by the CFTC on Monday, May 21, notes that the advisory statement was jointly issued by the CFTC’s Division of Clearing and Risk (DCR) and Division of Market Oversight (DMO). The statement focuses on some specific areas involved in listing the digital currency derivatives on a swap execution facility or a designated contract market.

The advisory lists all the necessary conditions to be met by the exchange operators that include coordination with the CFTC staff, market surveillance, DCO risk management and governance, and large trader reporting.

Amir Zaidi, the director of the DMO, said: “The CFTC staff is committed to providing regulatory clarity as much as possible. As the virtual currency market continues to evolve, CFTC staff will seek to provide additional guidance to help market participants keep pace with innovation while complying with CFTC regulations.”

Brian Bussey, director of Divisions of Clearing and Risk (DCR), while further explaining the importance of CFTC’s new guideline said: “CFTC staff is providing this information, in part, to aid market participants in their efforts to design risk management programs that address the new risks imposed by virtual currency products. In addition, the guidance is designed to help ensure that market participants follow appropriate governance processes with respect to the launch of these products.”

The first Bitcoin futures were brought to the market by the CME and the CBOE Group back last year in December 2017 when the digital currency was trading at its peak. Later, the crypto markets witnessed a lot of volatility along with the lack of transparency by some of the trading platforms and a number of hacking episodes with caused the security agencies like the CFTC and the SEC to intervene.

During his recent speech at the North American Securities Administrators Association (NASAA) conference, CFTC chairman Christopher Giancarlo talked about the guidance for the digital currency derivatives.

He described the agency as having “been at the regulatory horizon on virtual assets,” and stated that the “CFTC staff advisory […] reflect[s] CFTC staff’s current thinking based on our growing experience with virtual currency derivatives,” adding that “As new products are brought forth, staff will reevaluate and revisit the advisory, as necessary, to address any new and emerging issues.”