CME Group is one of the oldest exchanges around, tracing it's history all the way back to the late 1800s, when it specialized in agricultural commodities. It's best known for things like futures and interest rate swaps that tend to be favored by professional traders. But as retail trading becomes big business, the CME is expanding its footprint in the space, including a recently-announced partnership with sports-betting platform FanDuel. So how does a marketplace that built its reputation on professional hedging and risk management now try to capture the attention of everyday investors? In this episode we speak with Terry Duffy, CME Group chairman and CEO, about the exchange’s push into retail, new competition in the Treasury futures space, and much more.
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Terry Duffy is the chairman and CEO of CME Group, the world's biggest derivatives exchange and a trading behemoth whose name is synonymous with Chicago's financial industry. In this wide-ranging interview, Duffy talks about the big risks in the market he's seeing right now and how the CME is preparing for them. He discusses everything from complaints over a lack of liquidity in Treasury futures, to the impact of the debt ceiling on CME's risk management, interest rate hedging trends in the aftermath of the recent banking crisis, and the exchange's expanding suite of crypto offerings. We also talk about how Duffy is viewing the CME's future in Chicago and, finally, his take on the onion futures debate.
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"It's been number one on the ask list for a long time."
That's Tim McCourt, global head of equity products for CME Group. Speaking about the reception of the more than hundred-and-seventy-year-old exchange's latest product -- futures based on ETH, the native cryptocurrency of the Ethereum network -- McCourt characterized the response as "overwhelming."
"People have been really excited ... I think for a long time customers have really been demanding ether futures. They're really excited about the bitcoin futures and the success they've had," he said on the most recent episode of The Scoop.
CME Group saw 388 contracts traded on the first full day of trading for the product, which was announced at the end of last year.
That's about 19,000 ETH, or $33 million. The launch of ether futures followed the launch of bitcoin options at the end of 2019 and its bitcoin futures product in 2017.
At last check, open interest in CME's bitcoin futures product stood above $2 billion.
McCourt said that unlike products trading on other venues, CME's crypto products trade on a venue to which professional market participants are already connected.
The firm's crypto products "widgets through the machine” in the same way as its thousands of other contracts, he said. "Your brokers are familiar. Your clearing members are familiar. So you don't have some of those barriers to enter that you have on the spot side."
In this episode of The Scoop, McCourt unpacks the growth of CME's crypto products, the development of the overall crypto trading ecosystem, and what might come next for his company's crypto offerings.
Episode 7 of Season 3 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Tim McCourt of CME Group.
Listen below, and subscribe to The Scoop on Apple, Spotify, Google Play, Stitcher or wherever you listen to podcasts. Email feedback and revision requests to podcast@theblockcrypto.com.
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Sandra Ro, the CEO of the Global Blockchain Business Council and former head of digitization at CME, explains what the GBBC does, how it chooses partners, and what level of involvement they have with projects under the GBBC umbrella. We discuss some of the more controversial projects, such as the Voatz pilot that conducted election voting using blockchain technology, as well as how she responds to people saying many "blockchain" projects could instead use a database. She also reveals why she believes that the US will eventually lead the world on crypto regulation, why she thinks that there's strength in the fragmentation in US regulations and what she thinks is the best way forward on the BitLicense. Plus, she gives us the inside scoop on what it took for her to get CME to launch Bitcoin futures.
Thank you to our sponsors!
Crypto.com: https://www.crypto.com/
Kraken: https://www.kraken.com
CipherTrace: http://ciphertrace.com/unchained
Episode links:
Sandra Ro: https://twitter.com/srolondon
GBBC: https://gbbcouncil.org/
Previous Unchained interview with Sandra: https://unchainedpodcast.com/what-is-one-of-the-worlds-largest-derivatives-exchanges-doing-with-bitcoin/
Controversy over Voatz: https://slate.com/technology/2019/07/west-virginia-blockchain-voting-voatz.html
Episode with Jake Chervinsky: https://unchainedpodcast.com/all-things-crypto-regulation-with-jake-chervinsky/
Jeremy Allaire on Unconfirmed on why the US needs a new category for digital assets: https://unchainedpodcast.com/jeremy-allaire-on-why-the-us-government-needs-a-new-category-for-digital-assets/
Fred Wilson on crypto regulation in the US: https://avc.com/2019/05/defendcrypto-org/
Ted Livingston on why Kik set up DefendCrypto.org: https://unchainedpodcast.com/kin-sets-up-5-million-defendcrypto-org-to-take-on-the-sec/
Unchained interview with Juthica Chou: https://unchainedpodcast.com/ledgerx-on-the-reasons-to-trade-bitcoin-options/
Patent for physically settled cryptocurrency derivatives contracts: https://www.coindesk.com/cme-explores-cryptocurrency-derivatives-contracts-in-patent-filing
Ro named to New York State Digital Currency Task Force: https://www.coindesk.com/new-york-legislature-names-initial-members-to-crypto-task-force
The Libra Association's Dante Disparte on Unconfirmed: https://unchainedpodcast.com/libras-dante-disparte-on-why-we-should-trust-a-financial-system-designed-by-facebook/
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This talk is from a panel I led on infrastructure in the crypto space at the Time Summit, by Bridge Alternatives, featuring Kayvon Pirestani of director of institutional sales at GDAX, Tim McCourt, CME Group’s managing director and global head of equity products and alternative investments, Michael Moro, CEO of Genesis Trading and Genesis Capital, and Hu Liang, founder and CEO of Omniex. We discussed what infrastructure tools need to be built to get institutional players comfortable with the space, how custodying a digital asset differs from custodying a traditional asset, why they can see institutional players dealing in stablecoins and trading on decentralized exchanges at some point in the future, and what needs to be built out in terms of trading infrastructure for institutional players. (Hint: it turns out Excel and Google Sheets are the biggest competitors for crypto trading infrastructure services.) We also talk about the challenges of building out infrastructure for trading that can suddenly double or quadruple in volume and for a market that runs 24/7/365.
Thank you to Bridge Alternatives and the Time Summit for the panel!
https://www.bridgealternatives.com/
https://timesummit.org/
Kayvon Pirestani: https://timesummit.org/2018/03/19/kayvon-pirestani/
Michael Moro: https://timesummit.org/2018/04/21/michael-moro/
Tim McCourt: https://timesummit.org/2018/03/15/tim-mccourt/
Hu Liang: https://timesummit.org/2018/03/23/hu-liang/
The episode with Mike Belshe where we discuss custodying digital assets and qualified custodians: http://unchainedpodcast.co/mike-belshe-on-what-bitgos-kingdom-trust-acquisition-means-for-crypto-and-how-security-will-develop-in-the-future
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Quantstamp: https://quantstamp.com/
Ethereal Summit: https://etherealsummit.com/
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CME Group handles three billion contracts worth about $1 quadrillion annually. So why is it making a foray into bitcoin, whose market capitalization is a mere $16 billion? Sandra Ro, CME's head of digitization, explains its first cryptocurrency products, the Bitcoin Reference Rate and the Bitcoin Real-Time Index, as well as a forthcoming blockchain-based product, Royal Mint Gold. She also reveals which other cryptocurrencies have piqued her interest and which other physical world assets she thinks could be traded by blockchain.
Read the show notes.
Other links:
CME's Bitcoin Reference Rate
Bitcoin Real-Time Index
Royal Mint Gold
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