It’s business as usual for CME Group’s bitcoin futures market, despite a retrenchment by rival derivatives exchange operator Cboe Global Markets.

Contacted by CoinDesk Friday, a spokesperson for CME said the exchange has “no changes to announce re our bitcoin futures contract” and declined to comment on Cboe’s pullback.

The affirmation is notable in light of the news Thursday that Cboe will not add a bitcoin futures contract for trading in March.

This means that after the last currently traded futures expire in June, this market will essentially come to a halt at Cboe Futures Exchange (CFE), at least until new futures get listed.

“CFE is assessing its approach with respect to how it plans to continue to offer digital asset derivatives for trading. While it considers its next steps, CFE does not currently intend to list additional XBT futures contracts for trading,” the company said in its notice to investors.

A spokesperson for Cboe declined to comment beyond Thursday’s product update.

The difference in outcomes isn’t all that surprising since CME’s volumes have been approximately more than double Cboe’s.

As of March 14, for example, the daily trading volume of CME’s bitcoin futures was reported at 4,666 contracts, compared to 2,089 contracts at Cboe.

Product-market fit

Market participants offered several explanations for CME’s outperformance of Cboe in bitcoin futures.

One reason could be the difference in how the two exchanges approached the product and marketed it, Lanre Sarumi, CEO of a crypto asset derivative exchange Level Trading Field, told CoinDesk.

First of all, CME made its product available to a larger group of traders from the very beginning, Sarumi explained, saying:

“Connecting to both CME and Cboe is expensive. If you are already trading other products on an exchange, then there is no new cost. If not, you must pay for connectivity, software license, market data, cross connects etc.  — all that just to trade one new product?”

Cboe put the bitcoin futures on its Cboe Futures Exchange (CFE), Sarumi goes on, where people mostly trade Cboe Volatility Index (VX) Futures: “If you don’t trade VX then do you want to pay hundreds of dollars extra per account just to dabble in bitcoin?”

CME group, on the other hand, put bitcoin in the equities group on the CME exchange, which offers a lot of products and asset classes enjoying large daily volumes, Sarumi said. So a lot of traders already trading various assets at CME had no additional steps to take to get into bitcoin.

Other intangibles

In addition, CME invested more effort in promoting its futures than Cboe did, Sarumi believes. “Cboe was more like ‘build it and they will come.’”

The price discovery method could also contribute to CME’s advantage: while Cboe’s relies on an auction at the Gemini exchange, CME settles to an aggregate price of several spot markets, which might look more reliable to traders.

John Todaro, director of research at TradeBlock, says CME’s strategy might have had more success due to greater flexibility.

“CME had greater position limits, allowing single accounts to hold a larger number of contracts,” he told CoinDesk. “Over time, the CME gained greater market share. The Cboe raised contract limits in order to remain competitive late in the summer of 2018, but by this time the CME was trading in significantly higher volume.”

Marc Hochstein contributed reporting.

Image of CME director of equity products Tim McCourt via CoinDesk archives

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