SGX to introduce Bitcoin and Ethereum perpetual futures on November 24
The Singapore Exchange (SGX) is set to launch Bitcoin and Ethereum perpetual futures on November 24 to cater to the increasing demand from institutional investors, establishing a connection between traditional financial systems and the world of cryptocurrencies.
These perpetual futures contracts will provide institutional, accredited, and expert investors with a unique opportunity to engage in continuous trading without any expiry dates. Additionally, they will adhere to stringent clearing and margining standards typically associated with listed derivatives, ensuring a secure trading environment.
One notable feature of these contracts is the adoption of a funding rate mechanism, which allows for the adjustment of basis risk. This mechanism facilitates the convergence of the futures contract price towards the actual cryptocurrency index price, thus minimizing any potential basis risk associated with traditional futures contracts that have longer expiry dates.
The contracts will be tied to the iEdge CoinDesk Crypto Indices, which offer real-time benchmarking and reference rates for Bitcoin and Ethereum. By leveraging these indices, SGX aims to provide a reliable and transparent foundation for cryptocurrency trading activities within the institutional realm.
While the global daily average volumes of perpetual futures exceed US$187 billion, much of this activity is conducted on offshore platforms outside of the Asia region. SGX’s foray into this market segment seeks to address this gap and bring these trading flows closer to home.
According to SGX Group president Michael Syn, the introduction of Bitcoin and Ethereum perpetual futures represents a strategic move to apply institutional standards to the ever-evolving world of cryptocurrencies. By incorporating institutional discipline into the trading of crypto assets, SGX hopes to enhance market accessibility and reliability.
The announcement of the launch has garnered positive feedback from industry participants, who view it as a strategic initiative to expand access to cryptocurrency markets. This move reflects the increasing mainstream adoption of cryptocurrencies and the growing interest from institutional investors.
Recognizing the benefits of perpetual futures, Patrick Yeo, the head of digital assets at DBS Bank, highlighted the enhanced precision and capital efficiency that these contracts offer institutional traders in managing their digital asset portfolios, compared to traditional spot trading methods.
Gracie Lin, the chief executive of OKX Singapore, emphasized the importance of regionally anchored benchmarks to meet the demands of institutional investors looking to incorporate cryptocurrencies into their portfolio. By providing transparent and reliable benchmarks, SGX’s initiative is seen as a crucial step in the long-term development and growth of the cryptocurrency ecosystem in Singapore.
In conclusion, SGX’s decision to launch Bitcoin and Ethereum perpetual futures represents a significant move in catering to institutional demand and advancing the accessibility and reliability of cryptocurrency trading within traditional financial frameworks.
