Bitcoin will come to Wall Street on Sunday, and some executives of the world's biggest banks are not sleeping well.
Cboe Global Markets Inc. has a few days to go before it launches cryptocurrency futures contracts, many banks are still weighing whether to offer them to customers, and if so, how to handle the mechanisms. In the interviews, some executives and merchants said that their desks are eager to participate in the action, but most sounded like warning notes, marking concerns and unanswered questions. The violent swings in Bitcoin prices this week have made the new market look even more dangerous.
All the people, speaking of half a dozen big firms, asked not to be named, in some cases saying they are worried contradicting the public statements of their employers. Others said it is still too early to take a position. Here are some of his main concerns:
Some CEOs of banks and industry leaders have spent months publicly mocking bitcoin: "It's a fraud", "the very definition of a bubble  "Or an" index for money laundering "- and who knows what they have said in private. Now, what will it look like if companies help customers invest in something that explodes? How could internal comments on future ones sound if they ever spill over in legal cases? One executive, for example, privately referred to the cryptocurrency as "sh * tcoin".
Enthusiasts say that bitcoin is a coin. The Commodity Futures Trading Commission says it's a commodity. The same goes for Goldman Sachs Group Inc. Therefore, it may seem natural that the trading tables in those markets handle the new contracts. But one executive said there is at least one argument for making stock desks (and delta one traders specifically) be used to mathematics: Bitcoin is like a volatile stock, and futures, at least in some way, are like tracking options
When badet prices are stable, it is relatively easy for banks to create markets: help a customer buy or sell an badet, and then take time to find another customer that want to take an opposite position. But the bitcoin is too radioactive for the banks to maintain: it oscillates in a disorderly manner in a matter of minutes and there is no established model to account for it in the balance sheet. Then, the banks will try to liquidate the new contracts, matching one investor with another. That can be difficult. Some traders, for example, said that many customers are only interested in shorting. That can make it a pretty hard day at the office: without long, exchanges can be expensive and difficult to establish.
Dangers in Clearing
This was presented in a letter this week from the Futures Industry Association, which said that Cboe and the largest exchange operator CME Group Inc. are rushing to launch the futures to the market without a adequate consideration of risks. The business group, made up of some of the world's largest derivatives brokers, said it was concerned that the extreme volatility of the cryptocurrency could lead investors to default if prices fluctuate. That could harm companies that cancel contracts.
It will be difficult for big bureaucratic banks to discover all these mechanisms, and their own stomach for business, in a tight schedule. A person close to Goldman Sachs said Thursday that he will initially eliminate bitcoin contracts for certain clients on a case-by-case basis. Bank of America Corp. and Citigroup Inc. will not offer compensation in the coming weeks. And in some other companies, executives said they can enter when they're ready. So, if they choose to enter, it will be easy. But will a small presence of the big players give an advantage to the more agile and risk-friendly companies that embrace the new market from the door?