NEW YORK (BLOOMBERG) - Nasdaq is charging into the race to bring bitcoin to a greater swath of investors, as the digital currency's price barreled beyond US$11,000 on Wednesday (Nov 29).
The New York-based exchange operator plans to introduce bitcoin futures next year, according to a person familiar with the matter, becoming the third major US exchange to dive into the red-hot market for cryptocurrencies. Nasdaq will introduce the products as early as the second quarter, and the contracts will trade on its NFX market, according to the person, who asked not to be named discussing a private matter.
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 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.
"They're a small futures exchange, so they possibly see the potential to get into a product that could be much larger some day," said Rich Repetto, an analyst at Sandler O'Neill & Partners LP.
Allan Schoenberg, a Nasdaq spokesman, declined to comment.
The strategy also means that New York Stock Exchange owner Intercontinental Exchange 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 to the person. 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 person said.
The Nasdaq contracts are also designed to handle bitcoin hard forks more elegantly, the person 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."
The Wall Street Journal earlier reported on Nasdaq's plan.