Home / Business / The FIA ​​complains with CFTC about bitcoin futures

The FIA ​​complains with CFTC about bitcoin futures





  Trader Paul Duffy announces an operation on the S & P futures pool in the CME group in Chicago on September 13, 2012, after the Federal Reserve launched another aggressive stimulus program on Thursday, saying it would buy $ 40 billion of debt related to month mortgages until the employment prospects improve substantially while inflation.
Dealer
Paul Duffy points out an operation in the S & P futures pool in the CME
group in Chicago, September 13, 2012.


REUTERS / John
Gress




  • CME Group and CBOE configured to launch Bitcoin
    futures later this month.
  • Futures Industry Association (FIA) complains that there is
    has not been the proper consultation of the industry in the
    launching.
  • Clearinghouses that will guarantee futures are worried
    they will carry all the risks, says the FIA.
  • The price of Bitcoin moves regularly 10% in a day, which means
    the exhibition is not trivial.

LONDON – The commercial entity of futures, options and derivatives
markets is concerned that there has not been enough thought in the
potential risks posed by the introduction of bitcoin futures
contracts.

CME Group, the largest exchange operator in the world, announced

plans to launch bitcoin futures contracts in October,

effectively leaving
institutional investors bet on the price of bitcoin.
Rival
CBOE
announced bitcoins futures shortly after
and both products are
ready to launch later this month. Nasdaq is also believed to be
planning a similar product for the new year.

The Futures Industry Association (FIA) warned on Thursday that
not enough thought has been given to these products and the risks
they pose for financial stability.

CEO of the FIA ​​Walt Lukken
he said in a letter to the Commodity Futures Trading Commission (CFTC)
president
Christopher Giancarlo that there has not been
"Transparency and adequate public contributions" from the industry in
products.

CME and CBOE are "self-certified" of their products, which means
they are being launched without the official blessing of the CFTC.
Lukken said: "We believe that this accelerated self-certification
process for these new products does not align with the
potential risks that underlie their business operations and should
reviewed."

Lukken said that the clearing houses that are members of the FIA ​​are
worried about his possible exposure to these new products.
The compensation chambers are between two commercial parties and guarantee
derivative contracts in the event that one of the operators declares bankruptcy.
These intermediaries are meant to stop a domino effect of bankruptcy
contracts that could cause another financial crisis.

But the volatile and novel nature of bitcoin means clearinghouses
They are not sure how to account for future Bitcoin contracts. It is not
unusual for bitcoin to oscillate as much as 10% in a day, compared to
more established assets such as stocks and commodities, which rarely
move more than one% in a day.

"Given the lack of historical data on these products, it is
In addition, with respect to the compensating members, they will have the
most of the risk associated with them through their guarantee
fund evaluation contributions and obligations, "Lukken wrote.

He said:

"A more thorough and considered process would have allowed a
solid public discussion among member firms of compensation, exchanges
and clearing houses to determine the correct margin levels,
negotiation limits, stress tests and related guarantee fund
protections and other necessary procedures in case of excess
price movements. The recent volatility in these markets has
stressed the importance of establishing these levels and processes
in an appropriate and conservative manner. "

Here is Lukken & # 39; s
Complete letter to the CFTC
:

RE: Open letter on the list of cryptocurrencies
derivatives

Dear President Giancarlo:

The FIA ​​and its compensation member firms have noticed last week
exchanges announcements regulated by the CFTC and clearing houses for
self-certify certain futures and options contracts in
cryptocurrencies. While we are strong supporters of innovation and
competition in the markets, however we believe that
events have brought to light the concerns with the process in
that these novel products have come to the market.

As leading members of derivatives clearing houses around the world,
The 64 compensation members of the FIA ​​play a key role in the reduction
of systemic risk by guaranteeing the commercial exchanges of its clients,
contributing to the guarantee funds of the clearing houses and
Commit to the evaluation obligations during the clearing house
deficiencies In light of the public statements of the CFTC and the NFA
with respect to the risk of the underlying cryptocurrency
products, we believe that the launch of new exchanged in the stock market
Derivatives in cryptocurrencies deserve a healthy dialogue
between regulators, exchanges, clearing houses and cleaning
companies that will absorb the risk of these volatiles, emerging
instruments during a predetermined value.

Unfortunately, the launch of these innovative products through
the 1-day self-certification process did not allow the correct
public transparency and contributions. According to the law, exchanges can
self-certify a product for trade at the close of business
day and then list the product for trade the next day. This
process does not require approval or entry of CFTC and allows little
or there is no time for public review. While it is suitable for standardized
products, this process is not distinguished by the risk of a product
profile or unique nature. We believe that this accelerated
Self-certification process for these new products is not
align with the potential risks that underlie your trade and
It must be reviewed.

Given the lack of historical data on these products, it is
In addition, with respect to the compensating members, they will have the
most of the risk associated with them through their guarantee
contributions of funds and evaluation obligations, even if not
participating in these markets directly, instead of
exchanges and clearing houses that have listed them. A public
It should have been debated whether a separate guarantee
background for this product was appropriate or if they were exchanged
additional capital against the compensating member's guarantee
background. This is one of the reasons why the FIA ​​has advocated for an "adequate skin"
the game "by CCP to ensure that an appropriate level of risk is
in charge of the exchanges and CCP that decide unilaterally when and
how to list and manage the risks of these products.

We also understand that not all the risk committees of the
Relevant exchanges were consulted before certification for
launch these products. While this may not have been required
technically under the rules of exchanges and clearing houses,
The guidance of CPMI-IOSCO, as well as good governance, would suggest
that the risk committees are consulted before the certification of
such instruments not tested.

A more thorough and considered process would have allowed a
solid public discussion among member firms of compensation, exchanges
and clearing houses to determine the correct margin levels,
negotiation limits, stress tests and related guarantee fund
protections and other necessary procedures in case of excess
price movements. The recent volatility in these markets has
stressed the importance of establishing these levels and processes
in an appropriate and conservative manner.

While we greatly appreciate the efforts of the CFTC to receive
additional guarantees of these exchanges, we remain
apprehensive about the lack of transparency and regulation of
underlying reference products in which these futures contracts
are based and if the exchanges have adequate supervision of
ensure that the reference products are not susceptible
manipulation, fraud and operational risk.

The mission of the FIA ​​is to support an open, transparent and competitive market
markets; protect and improve the integrity of finances
system; and promote high standards of professional conduct. Is
in light of these objectives we believe that a thorough
discussion and risk assessment across the industry
the interested parties would have been prudent to ensure the long term
success and viability of these products.

We look forward to a healthy public discussion on how to improve
this process in the future, as well as the continuation of the Commission
supervision of these emerging instruments.

Sincerely,

Walt Lukken

CEO, Futures Industry Association

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