Bitcoin Limits, MiFID II Limits and More

CME shocked the market with its intention to launch Bitcoin futures by December 2017. We think it’s very likely that bitcoin futures will go a long way in reducing bitcoin volatility and ushering its movement into a regulated market. BTC Futures launch December 18th.

CME set spot limits at 1,000 contracts and accountability levels at 5,000 contracts. On a contract size of 5 Bitcoins this is roughly equivalent to $50MM and $250MM respectively.  At the time of this writing Bitcoin has an overall market size of just over $160 Billion. All things considered this appears on the surface to be a very conservative limit. Any traders who cross either the spot or accountability levels are subject to sanctions from the CME. You can find the product specification here.

Also Proposed FCA MiFID Limit Issues

Across the pond in the UK, the FCA set its proposed MiFID II limits. Let’s just say we’ve had some very interesting discussions on what it all means (more on this later). In a nutshell, the proposed FCA limits are very, very high. They are also not without some minor functional problems that will undoubtedly be ironed out.

Specifically, some of the de-minimis products state that the spot period is set as equal to the exchange contract specification. The problem is exchanges specify spreads products to break into their legs each with individual limits, and as such have different spot periods. In other words, on a spread trade referring to the contract specification creates theoretical spot periods. There is also some vague points around ratable products like gas and power that needs some clarification. There are a handful of limits still missing a spot period. But, again, we fully expect the FCA to clarify (and hopefully soon).

What we’ve noticed from NCA’s so far is pretty high limits in general. Perhaps this is just a warm up period?

Incidentally, if you are thinking of trading Bitcoin futures and are not sure what spot limits and accountability levels are, please DO give us a call. We will walk you through it.