NASDAQ, the second-largest stock exchange platform in the world, is not deterred by the dip in the crypto market as it has joined forces with investment management firm VanEck to launch various digital assets to the market.
Bitcoin Futures Contract
Rumors of a NASDAQ Bitcoin futures contract has been making the rounds for a while, with a recent Bloomberg report, citing “two people familiar with the matter,” who confirmed that the exchange would be launching bitcoin futures contract, early 2019. The reports were also confirmed by Gabor Gurbacs, the Director of Digital Asset Strategy at VanEck, via a tweet.
Chief among these products will be a Bitcoin futures contract. This contract will be traded on the NASDAQ, and VanEck will be responsible for compiling the spot price of Bitcoin across a wide array of cryptocurrency exchanges.
Speaking at the Consensus Invest conference in New York on Tuesday, Gurbacs spoke about “bringing a regulated crypto 2.0 futures-type contract” to the market.
“What I’d like to point out is we ran a few extra miles working with the Commodity Futures Trading Commission to bring about new standards for custody and surveillance.”
In an interview, Gurbacs said that the futures product serves as a representation of an upgrade to the current regulatory measures of Bitcoin future products. He said that they plan to leverage SMARTS, the stock market surveillance system operated by NASDAQ, with their primary objective being to engender confidence in both regulators and institutional investors yet to make a bet on the cryptocurrency industry.
SMARTS is software that hosts hundreds of detection algorithms. Each of these algorithms is designed to pick up on any market activity that is suspicious (including wash trading and spoofing). Gurbaacs explained that the technology, which he called the “big policeman engine,” will be able to help ensure that trading on Bitcoin futures would be done in a fair and orderly manner.
Cash-Backed or Physically Settled?
Currently, two BTC futures products have been approved by the Commodity Futures Trading Commission (CFTC); one of them is operated by the Chicago Board Options Exchange (CBOE), and the other is operated by the Chicago Mercantile Exchange and Crypto Facilities. These futures are cash-backed, which means that when they expire, Bitcoins won’t be used to settle the accounts. In sharp contrast, a physically-delivered Bitcoin futures product operated by Bakkt (a subsidiary of Intercontinental Exchange, the parent company of the NYSE), is expected to be launched at the turn of the new year. This means that when these contracts expire, the investors who hold them will be paid in Bitcoin.
Gurbacs hinted that there is “quite a lot to look forward to in 2019,” laying emphasis on a hopeful launch date for the Bitcoin futures product on the first quarter of next year.
It remains unclear if NASDAQ is planning to implement a cash-backed program, which will serve to bring some complication to the Bitcoin futures contract. However, considering the blockchain and crypto-friendly nature of the exchange (which has been classified in the past as a positive Bitcoin price catalyst), a cash-backed futures product doesn’t seem like so much of an impossibility.
In addition to this, the Bitcoin exchange-traded fund that was proposed by VanEck and blockchain firm SolidX, which will be physical-backed, is expected to get a concluding resolution by the Securities and Exchange Commission by February 2019. VanEck has been proactive the last few months as it hopes some of its activities including the launch of the MVIS Bitcoin U.S OTC Spot Index (MVBTCO)—which covers the price of Bitcoin on major OTC trading desks—would add legitimacy to the market and alleviate any fear the regulators might have concerning the crypto market.