Now the largest U.S. electronic brokerage firm allows clients to short bitcoin futures by the nascent bitcoin futures market on regulated exchange CBOE, but it costs small-scale traders out of the market.
According to the reports, Interactive Brokers are processing more daily average revenue trades than any other electronic brokerage firm in the U.S.; after that, the first bitcoin futures launched on CBOE.
Interactive Brokers is different from other brokerage firms that won’t allow clients to take up short positions in CBOE’s bitcoin futures market. Then gradually changes its mind after recognising the large premium that the January contracts were trading at over the spot price of bitcoin.
Thomas Peterffy, the founder and Chairman of Interactive Brokers, said “The introduction of short sales was necessitated by the large premium of the January futures contract over the price at which Bitcoin trades on the physical venues,”
At the time of writing, January futures were trading at $18,100, while the spot price of bitcoin was $17,631, as per CBOE’s index price.
In an interview, Peterffy stated “That says to me that there aren’t enough brokers allowing shorting,” “because if there were, there would be people that buy the cash and sell the futures.”
People will remember Peterffy as one of the most vocal critics of bitcoin futures and the exchanges that decided to list them. He explained the risks that bitcoin futures could have on the wider financial market by taking out a full-page ad in The Wall Street Journal.
Interactive Brokers finally decided that the futures products were going to be listed anyway as it will not stop clients from trading them.
The firm is processing about 50 percent of all trading volume during the first few days that bitcoin futures were listed on CBOE, so its decision to allow clients to short bitcoin could have significant results on the market.
In conclusion, the firm’s strict requirements will cost many retail investors out of the market. Those who took short positions will have to maintain a margin of $40, 000 per contract in their trading accounts for each short sale. Since each CBOE contract is similar to 1 BTC, that margin requirement goes out to more than 200 percent of the contract value. The clients who are taking long positions will be required to main a margin of $9,000 per contract, a rate of approximately 50 percent.
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