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Stock Brokerage Warns of CME's Bitcoin Futures Plan

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Themis Trading LLC, a stock brokerage agency for institutions, joined the attack against the CME group's decision to launch bitcoin futures A recent blog on the website of the company contends that the US Commodity Futures Trade Commission (CFTC) should not approve CME bitcoin futures.

Other Wall Street investors also spoke out against CME bitcoin futures and compared them to collateralized debt obligations that caused the 2009 financial crash.

Calling themselves "critics of the market structure," Themis Trading states from the outset that they are "in no way experts in cryptocurrency" and have joked that they would never write a note on blockchain.

CME reverses its position

The blog asks CME group president, Bryan Durkin, to cancel his position a few months ago, that he did not intend to launch any contracts futures on Bitcoin. The blog quoted an interview with Bloomberg TV in which Durkin said he was not seeing any future with a futures contract in the near future because Bitcoin is "very nascent at the moment."

The reason for his reversal can be found in the recognition of CME CEO Terry Duff that customers demand such a product, notes the blog. Another reason is that CBOE has announced plans to list bitcoin futures and that LedgerX is already trading options and swaps.

Exchange cellar on demand

Themis Trading regards bitcoin futures as part of a problem that has been facing the stock market for years. Large high frequency customers require a product from exchanges that are willing to comply because they do not want to lose an opportunity, even if they themselves have reservations about the product .

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Major stock markets such as BATS and NYSE are fined millions of dollars because of caving with large customers for sending market data to some customers before other customers and not to disclose particular types of orders.

Themis Trading believes that CME knows that the underlying bitcoin market is "very suspicious". CME knows, according to the blog, that bitcoin exchanges have been the subject of many cases of fraud in recent years, and that there is no regulation exchanges.

CME streamlines the creation of a futures product based on "an underlying market-type bucket-shop exchanges" by creating a benchmark price called CME CF Bitcoin Reference Rate, a weighted average in volume of time intervals of 5 minutes that a selected group of bitcoin exchanges provides. Means were needed since spot prices of bitcoins have varied widely from one trading site to another, particularly during periods of high volatility, noted MEC.

The creation of an index serves to legitimize the bitcoin trading, observes the blog.

Also listed: The World's Largest Derivatives Trading Group CME Group Launches Bitcoin Futures

Bitcoin still risky

The SEC said that by refusing the Winklevoss bitcoin ETF, there was a lack of regulation of bitcoin exchanges. An observer noted at the time that illegal practices would be easy to implement and impossible to detect.

Themis Trading says it would be dangerous for the CFTC to approve proposals on bitcoin futures, given the SEC's concerns regarding the lack of regulation. Themis Trading compared the proposal to secured debt securities sold during the financial crisis – instruments that gave a sense of approval for high-risk mortgages. A future bitcoin would give similar approval to an unregulated and risky instrument with a history of fraud.

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Themis Trading fears further that such approval is pushing the SEC to approve bitcoin ETFs, which would be buried in portfolios that do not tolerate the risk of trading unregulated assets.

The company claims that it is not anti-future, anti-bitcoin or anti-ETF, only anti-fraud. Until bitcoin exchanges "clean up their action" and solve the problem of monitoring, derived cryptocurrency products should not be approved.

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