Ethereum

CME Group set to alter its reference rate for Ether, and it could mean the exchange is getting ready for futures

Quick Take

  • CME Group is set to make changes to its reference rate and index tied to ether
  • Sources say it could mean a future tied to the crypto is coming to its marketplace

CME Group is changing up its reference rate and index tied to ether, which is slated to occur July 15, according to a notice released by the firm Friday.

itBit, the exchange unit of New York-based fintech firm Paxos, will provide data for the two financial instruments, joining Bitstamp and Kraken. Crypto Facilities will continue to act as the administrator of the CME CF Ether Reference Rate and CME CF Ether Real Time Index, which both launched in 2018, according to the company. 

CME said itBit satisfied the criteria for being included as a participant in the indexes, the firm added. The addition of itBit could signal that the exchange is getting closer to launching a future tied to the second-largest cryptocurrency, according to sources.

“I think this is prep for an Ether future,” an industry source said. “They have to improve the robustness of their index.”

Without reliable data, a cash-settled future can be easily manipulated or simply not represent the actual price of the underlying asset, the source said. 

“It’s the implicit limitation of CME’s cash settled futures — always need market data from spot exchanges,” the person said. 

CME told The Block that it is focused on its ether index and reference rate when asked if the move signaled futures for the cryptocurrency were on the horizon.

CME’s Bitcoin Reference Rate serves as the basis of its bitcoin futures product, which has been on a tear since the beginning of the year. The contracts, which represent 5 bitcoin apiece, have continued to clock in new volume records in 2019 and have seen an increase of 30% in client sign-ups since the beginning of the year, as per CoinDesk. itBit, Coinbase, and Kraken are among the exchanges that provide data for the BRR. 

itBit began trading ether earlier this year and has seen its marketshare grow thanks in part to rebates it offers to traders who bring liquidity to its platform

Elsewhere, ErisX and LedgerX are prepared to offer trading of physically-delivered futures tied to ether at some point this year. 

itBit representatives did not respond to an inquiry prior to publication.