CME Group (CME) to Introduce Micro Bitcoin Futures Contract

CME Group Inc. CME is set to expand its suite of crypto derivatives with the launch of a new Micro Bitcoin futures contract. Pending regulatory conditions, it will be launched on May 3.

The new Micro Bitcoin futures will be one-tenth the size of one bitcoin. The smaller-sized contract will provide market participants with one more tool to hedge their spotbitcoin pricerisk or execute bitcoin trading strategies in an efficient, cost-effective way, apart from retaining the features and benefits of CME Group's standard Bitcoin futures. This will enhance the trading strategies.

CME Group first launched Bitcoin futures (BTC) in December 2017. Since then, it has witnessed 22 successful futures expiration settlements, with over 3,500 individual accounts trading the contracts. Its notional value has increased dramatically.

The BTC notional value has increased from $19K on the date that it was launched to nearly $58K on Mar 11, 2021. The amount of capital needed to access the futures market has significantly increased. To make the market more accessible to risk managers and other traders, CME Group will launch the Micro Bitcoin futures contract, which is 1/50 the size of the Bitcoin futures contract.

Based on increasing client demand and robust growth in the Bitcoin futures markets, the launch of Micro Bitcoin futures will add more granularity to trading and risk-management strategies and the participants will get the benefit of price discovery of transparent futures where they can see same prices and quotes.

CME Group continues to focus on driving growth and new customer acquisition by expanding, innovating and scaling its core offerings, and increasing participation from non-U.S. customers. This is achieved by expansion of its global sales team, cross-selling of products, expansion of the existing benchmark products, product and service launches and deepening of open interest in core futures and options offerings. The company launched bitcoin options and options on SOFR in January 2020.

The newly launched futures contracts will add to CME Group's robust suite of futures and options.

CME Group exchange consists of designated contract markets for the trading of futures and options contracts. It enables clients to trade futures, options, cash and over-the-counter (OTC) markets and optimize portfolios. It focuses on maximizing futures and options growth globally, diversifying business and revenues, and delivering unparalleled customer efficiencies and operational excellence.

Shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded has rallied 23.3% in the past year compared with the industry’s increase of 35.1%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should drive shares higher.

The stock carries a Zacks Rank #3 (Hold) currently.

Stocks That Warrant a Look

Some better-ranked stocks from the finance sector are OTC Markets Group Inc. OTCM, Diebold Nixdorf, Incorporated DBD and Repay Holdings Corporation RPAY, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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