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It is my pleasure to welcome David Lerman @ CME Group, sponsored by Ironbeam Futures, for our 411th webinar event, on Thursday, February 4th @ 4:30 PM Eastern US.
The title for the event is "Introducing Ether Futures", and bullet points include:
- The growing cryptocurrency landscape at CME Group
- Benefits of cryptocurrency futures
- Bitcoin & Ether compared
- Free CME Institute classes & courses
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,206
Excellent.
FYI CME released the margin requirements for these contracts this week and it is a staggering 50% of Notional which makes Bitcoin margins (37% of Notional) look low! With a contract size of 50 Ether, and a current price of $1350, it has a Notional Value of $67,500 and a margin requirement of $33,750. (vs Bitcoin which is $171k and $63k respectively).
I find this interesting given that the next largest margin requirements for CME contracts are Palladium $30k, NQ $17k, EMD & Silver $15k, ES $12k and Gold $11k. Why make them so big, especially after the new found success of the micro's. Even the DAX which is the biggest non-crypto contract I know of is only €34k.
Good god...I was thinking of trading the Ether futures but this makes it close to impossible except for the big boys. Need to research the margin for spreads on this
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,206
Related CME announced today they are increasing margins on Bitcoin from 36% of Notional (I incorrectly said 37% above) to 42%. With a price of $33.5k that's an increase of $10,050 per contract to $74,550. That really does make this untradeable for anybody but the largest of accounts. Be interesting if we see any liquidation because of this. Rumor is HFs are short Bitcoin futures, with the speculation that they are short futures, versus long actual coins, collecting the yield, which is currently about 8%. The 17% increase in margin requirements (from 36% to 42%) will take more than 30bp out of the yield trade if you have it on. That drop in yield is more than the entire yield of 90 day Libor which is only 17.5bp.
I'm a bit confused.. the Bitcoin CME futures contract still exists? Was there another Bitcoin futures contract that got eliminated? I thought I saw some news in passing about it
The margin requirements are always made based on historical past moves and what size moves are within certain standard deviations of price movement. The requirement is set to avoid stop outs and credit risk and counterparty risk, yadda yadda. There is no real possibility of lowering the margin requirements.
So the answer is to introduce smaller sized contracts (smaller notional value). I'm guessing a 5 Ether notional value would be more retail friendly....? At $1650, that's a notional of
$8250 and a maintenance margin of $4125 per contract. Still a bit steep in comparison to micros, but FCMs could extend day trade margins like they do w the index contracts and bridge the gap to retail margins. But am I doing my math right?
Final point, between the post title and the webinar title.... Ether ! = Ethereum. Ether is the token, Ethereum is the network. Things other than Ether trade on the Ethereum network. This is a contract for Ether, not Ethereum.
