As bitcoin hits new high, Nasdaq, Cantor to join bandwagon

Nasdaq Inc and broker Cantor Fitzgerald LP are looking to join the rush on Wall Street to trade bitcoin, as the digital currency's price barrelled beyond $11,000 to a set new record on Wednesday.

Nasdaq aims to launch bitcoin futures in the first half of 2018, both The Wall Street Journal and the Chicago Tribune reported citing people familiar with the matter.

Separately, Cantor said it is seeking to launch bitcoin derivatives on an exchange it owns, according to WSJ.

Nasdaq will follow the two Chicago-based markets that have already indicated the specifics of their bitcoin futures plans.

While regulatory approval is still pending, the reality that bitcoin futures are an in-demand option has driven a number of exchanges to at least consider the possibility. Cointelegraph quotes John D'Agostino, a former Nymex executive and current Nasdaq board member, as saying, ''Every research department of every regulated exchange is saying, 'Can we do this?' … This is a gift from the heavens.''

According to WSJ, the exchange would add the Bitcoin contract onto its existing Nasdaq Futures platform (NFX). The platform was launched in 2015 and has mainly focused on energy trading, but would now be potentially repurposed to include cryptocurrency contracts.

The plan is yet another sign of a large exchange operator pushing bitcoin further into the mainstream investing universe. The offering will pit Nasdaq against two bigger competitors, CME Group Inc and Cboe Global Markets Inc, both of which already announced plans to offer cryptocurrency derivatives. Nasdaq is a comparatively small player in the futures market, which may make it harder to cultivate an image as a destination for cryptocurrency derivatives trading.

But while CME Group has a much larger futures market than Nasdaq, the latter has greater name recognition among retail investors. Nasdaq's imprimatur might make a significant difference for ordinary investors who might be on the fence about whether to buy digital currency.

The strategy also means that New York Stock Exchange owner Intercontinental Exchange Inc is the only one of the four major US exchange operators without public plans to offer bitcoin derivatives.

One way Nasdaq seeks to differentiate itself seems to be in the amount of data it uses for pricing the digital currency contracts. VanEck Associates Corp, which recently withdrew plans for a bitcoin exchange-traded fund, will supply the data used to price the contracts, pulling figures from more than 50 sources, according Chicago Tribune's sources. That appears to exceed CME's plan to use four sources, and Cboe's one. Nasdaq's contracts will be cleared by Options Clearing Corp, the sources said.

The Nasdaq contracts are also designed to handle bitcoin hard forks more elegantly, The Tribune report said. Hard forks occur when miners agree to changes in the network that underpins the cryptocurrency, creating a new version. Nasdaq's product will reinvest proceeds from the spin-off back into the original bitcoin in a way meant to make the process more seamless for traders, the person said.

Bitcoin currently trades on virtually unregulated markets. Nasdaq, CME and Cboe are heavily regulated, bringing an air of legitimacy that should help professional investors feel more comfortable participating. Anyone on the sidelines has missed out on a massive rally: bitcoin's price has increased in value by more than 11 times in 2017.

"It's a great example of the increasing institutional interest in this new asset class," said Adam White, general manager of GDAX, a cryptocurrency exchange owned by Coinbase. "The emergence of derivatives will help with the process of price discovery."