Bitcoin is a currency, technology, and, most recently, futures product. Several clearinghouses have allowed bitcoin futures trading. Futures generally contribute to systemic blue sky traders bitcoin, [2] but distinctive features of bitcoin futures heighten concerns. Thus, the Futures Industry Association FIAa trade organization representing major banks and brokers, has protested the introduction of bitcoin futures to the market without more scrutiny, given their blue sky traders bitcoin potential to disrupt the economy.
This has created an unusual public gulf between institutional traders and the clearinghouses. There are several possible approaches, each with its advantages and drawbacks, but the main factor is risk management, with the biggest risk posed by a default blue sky traders bitcoin a bitcoin futures contract.
The first regulatory method is to simply prohibit bitcoin futures entirely, as some banks and governments have done. One option is to limit the number of positions that any one person may hold. Position limits reduce excessive speculation, deter market manipulation, ensure sufficient market liquidity for bona fide hedgers, and protect the price discovery function of the market. Another option is to increase the margin deposits on bitcoin futures. To control the risk of default, clearinghouses maintain a margin regime that includes an initial margin and a variation margin, both of which consist of collateral posted by a clearing member to protect the clearinghouse in the case of default.
Clearinghouses have over the years also used transaction fees to create guarantee funds designed to cover bad trades. In other words, the party who creates the risk should pay for it.
These separate guarantee funds for bitcoin futures could be created by the clearinghouse or its members. Finally, the health of much of the financial sector blue sky traders bitcoin been left to stress testing, which examines the performance of the regulated entity in hypothetical, challenging circumstances. In sum, while bitcoin futures are new, their risks are old. However, these familiar risks can be reduced with any of these approaches.
Griffith, Substituted Compliance and Systemic Risk: They are, at their core, nothing more than a contractual means by which parties allocate the risk of a fluctuation in price of an underlying reference asset. Your email address will not be published. Leave a Reply Cancel reply Your email address will not blue sky traders bitcoin published.
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