JPMorgan changed idea: ready to offer Bitcoin futures

6 years ago - Published in Finance, Fintech Land, Technical Analysis

Bitcoin has had an exciting year. It has split in two, become more accepted as a form of payment, and soared in value, now resting above $8,000. There’s also that small matter of the Chicago Mercantile Exchange (CME), the world’s leading derivatives marketplace, announcing plans to introduce bitcoin futures in 2017 — an announcement that some credit with pushing the cryptocurrency above the $8,000 threshold.

The bitcoin developments continued on November 21 when The Wall Street Journal reported that JPMorgan Chase is considering giving their clients access to CME’s bitcoin future via their own futures-brokerage unit.

As the WSJ explains, the move would enable JPMorgan customers to bet on bitcoin’s prices — specifically, whether they increase or decrease. JPMorgan, meanwhile, would charge a fee for providing access to CME’s service, presumably in the hopes of profiting from it.

There are obviously a couple of distinctions you might want to draw here. Bitcoin futures aren't the same thing as bitcoin, and facilitating trades isn't the same thing as trading. Even so, it's hard to see how a Wall Street bank could become an intermediary in this without putting its own capital on the table.

It's not clear at this stage how exactly JPMorgan would get involved, but the most obvious way would be using its futures commission merchant, or FCM. Such entities are the gatekeepers to futures clearing organisations and represent the capital-intensive central plumbing of the US derivatives market. That's by far the best fit for JPMorgan's talents – its FCM, JPMorgan Securities, is North America's second-biggest by customer assets, according to Commodity Futures Trading Commission data.

This would be a somewhat ironic development for JPMorgan because CEO James Dimon has criticized bitcoin in the past, telling attendees at September’s Delivering Alpha conference that the crypto is a “fraud” and “just not a real thing.” At another event, he said that anyone trading bitcoin is “stupid” and that any JPMorgan traders caught doing so would be fired. That said, no employees have claimed to have lost their jobs for such reasons just yet.