The UK’s CMC Markets Plc announced it would offer cryptocurrency contracts for difference (CFDs) and spread-betting, accessible at first to professional traders. Though too soon to call a trend, the company is following its rivals into an unsure market increasingly under threat from regulators.
More Crypto CFDs Added Due to Demand
“With the cryptocurrency market growing rapidly over the past 12 months,” CMC’s Grant Foley explained, “we have received significant interest from our clients for bitcoin and ethereum CFDs. As a result, we have developed a new offering for this unique digital asset class. We recognise that cryptocurrencies can be regarded as a volatile market, so we are initially only offering trading, on an exclusive basis, to our experienced professional client base.”
Based in London, CMC Markets Plc is owned by Goldman Sachs. It’s a worldwide market maker, and trades in contracts for difference, foreign exchange, and spread-betting. Spread-betting is a very British financial speculation similar to derivatives, and can be offered in parallel to CFDs. Its advantages include flexibility in trading hours, potential for innovation, and it usually has stop losses baked-in. Spread-betting is a contract between the market-maker and the client, not cleared by an exchange, and can avoid many regulations in doing so.
CFCs are financial derivatives. Traders take long or short positions on price without the bother of owning the actual asset – in this case, cryptocurrencies like bitcoin. They come in the form of indices, stocks, futures, bonds, commodities, or currencies. CMC for its part is entering crypto after rivals Admiral Markets, Gain Capital’s City Index, Plus500 Ltd., and IG Group Holdings Plc. have already proved the market can be made.
Mr. Foley of CMC continued, “We have built our bitcoin and ethereum cryptocurrency offering with our clients in mind. Like all other financial instruments we offer, we always recommend that clients understand the risks and conduct thorough research before trading.”
Regulators Watching Closely
It’s an interesting time to enter crypto, especially with US futures flatlining and bitcoin’s price plummeting in recent weeks. Add to those last month’s Autorite des Marches Financiers intervention, effectively insisting such crypto derivatives will be regulated within the European Union’s MiFID II. It could mean strict business conduct standards, mandatory reporting, and many of financial products are barred from electronic advertising.
The fuss might be worth it, however, as “Plus500 said the hype around cryptocurrencies drew more customers to its trading platforms and the company forecast 2018 revenue ‘significantly ahead’ of market expectations,” Reuters reported.
Do you think CFDs are a good move for crypto? Let us know in the comments!
Images via Pixabay, CMC.
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