The most significant U.S. electronic brokerage firm now allows clients to short bitcoin futures through the growing bitcoin futures market on regulated exchange CBOE. But the margin requirements may price small-scale traders out of the market.
Interactive Brokers that firm in the U.S which processes more daily average revenue trades than any other electronic brokerage, declared in this week this week, a few days after the first bitcoin futures launched on CBOE.
In the beginning, like many other brokerages firms, Interactive Brokers did not allow clients to take up short positions in CBOE’s bitcoin futures market. However, the company changed its mind after watching 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 that “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.”
During the reporting, January futures were trading at $18,100, while the spot price of bitcoin was $17,631, according to CBOE’s index price.
Peterffy described in an interview with Buzzfeed News that, 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.”
Many of the people may be remembering Peterffy as the most known critic of bitcoin futures and the exchanges that decided to list them. In the previous month, he took out a full-page ad in the Wall Street Journal to warn about the probability that bitcoin futures could have on the broader financial markets.
However, the Interactive brokers have been eventually decided to prevent the clients from trading them as the futures products were going to be listed anyway.
The firm said that it processed approximately 50 percent of all trading volume during the first few days that bitcoin futures were listed on CBOE. So its decision to permit the clients to short bitcoin will make a significant effect on the market.
Anyway, the firm’s strict requirements will likely cost many retail investors out of the market. All clients who take short positions will be needed to maintain a margin of $40,000 per contract in their trading accounts for each short sale. As much as each CBOE contract is alternative to 1 BTC, that margin requirement works out to more than 200 percent of the contract value. The clients who will be taking long positions must maintain a margin of $9,000 per contract, which is a rate of approximately 50 percent.