UK Bitcoin exchange Coinfloor has announced the launch of CoinfloorEX – a physically-settled Bitcoin futures exchange. Founder Mark Lamb broke the news on Twitter following an interview with Reuters at the Futures Industry Association conference in Florida. CoinfloorEX joins a growing number of Bitcoin futures exchanges in the nascent market; The final months of 2017 saw two major players of the global futures industry launch trading of Bitcoin futures, with both the CME and CBOE self-certifying bitcoin contracts after working closely with the CFTC regulatory body in the USA.
The contracts provided by these traditional futures exchanges are cash-settled, whereas CoinfloorEX will allow traders to take delivery of the underlying Bitcoin upon settlement. Futures contracts are broadly divided into cash-settled and physically-settled instruments, with each tending to suit different trading strategies and market participants. Coinfloor suggests that their offering is aimed at more sophisticated investors and professional traders, as well as providing a facility for Bitcoin miners to easily hedge their production cash-flow.
Bitcoin-denominated futures and derivatives have been available for the last few years and existing platforms appear to be experiencing huge growth in volume; Hong-Kong based Bitmex recently reported an impressive new record of $6.3B in total value traded during a 24-hour period across the exchange. The majority of existing futures exchanges handle either Bitcoin or fiat, but CoinfloorEX will allow users to utilise both bitcoin and fiat currencies as collateral, with easy access to their spot exchange to convert profits to fiat as required. The existing Coinfloor spot exchange infrastructure will no doubt help with this offering and their established reputation could help attract liquidity upon launch.
The specification document available from CoinfloorEX outlines that each contract is equivalent to 0.0001 BTC, with prices quoted in BTC/USD, and as they are facilitating leverage for the contract, the margin requirements are an initial 20%, with a 15% maintenance margin. CoinfloorEX is offering a flat fee structure such that almost all participants will pay a simple 0.03% fee on the value of trades, regardless of their monthly volume. The initial contract launch and commencement of trading will be next month in April.