The CME Group will be launching the crypto, Bitcoin, and Ethereum, futures contracts in Euros on August 29 after a regulatory review. It will be based on RepoFunds Rate (RFR) benchmarks and the Euro Short-Term Rate.
Sean Tully, CME Group Global Head of Rates and OTC Products, says the new European Overnight Index futures will support customers with liquid and capital-efficient tools for hedging overnight money market and repo rates in European markets. He pointed out that the firm continues to provide market participants with new tools, amid geopolitical uncertainty and large-scale transitions in monetary policy, to meet their evolving risk management needs. The new crypto futures will help customers manage sovereign debt risk in Europe.
Tim McCourt, the global head of equity and FX products at CME, said euro-dominated cryptocurrencies are the second-highest traded fiat behind the US dollar. The EMEA region, year-to-date, represents 28% of the total Bitcoin and Ether futures contracts traded, up more than 5% in 2021. McCourt said the ongoing uncertainty in cryptocurrency markets, along with the robust growth and deep liquidity of the existing Bitcoin and Ether futures, is creating an increased demand for risk management solutions by institutional investors who are not from the United States.
But the current trading volumes on the crypto derivatives market dwarf spot trading. It could lead to greater market instability as futures contracts can intensify the volatility of given market sentiment. In May 2021, when Bitcoin plummeted up to 30%, the leveraged-up positions in futures and options were liquidated. It amplified the sell-off.