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Nasdaq is actively exploring bitcoin-linked products and other digital currencies that would appeal to retail investors, Adena Friedman, the exchange’s chief executive has said.
The initiative comes as the financial establishment is looking for ways to play a part in the rise of cryptocurrencies, which gathered pace with bitcoin’s sharp appreciation last year, where trading volatility stands in sharp contrast to the placid markets for traditional assets.
Nasdaq rivals Cboe Global Markets and CME Group already have rolled out their own bitcoin futures contracts.
“We are looking to create a product geared to investors, not traders, as an investible asset,” Ms Friedman told the Financial Times, adding that what she is calling a “digital gold” model might be the most effective precedent to use when structuring retail-friendly products.
She described digital gold as a store of value that would exist alongside other “real” currencies, rather than a fully fledged currency in its own right. Nasdaq wants its product to be a vehicle for long-term investment rather than trading or arbitraging against moves in bitcoin.
Nasdaq has previously expressed interest in bitcoin futures. While it did not offer specifics, a total return future is a type of derivative that mimics a privately-negotiated swap, but is traded on a regulated exchange.
Nasdaq is also likely to create a bitcoin index, which might pave the way for exchange traded products, further broadening the retail appeal for digital currencies. CME has a bitcoin reference rate and Intercontinental Exchange recently unveiled plans to create a consolidated price data feed for cryptocurrencies.
Nasdaq officials stress that they have not yet taken any formal decision about when they might unveil this move, not least because US regulators have been opposed to bitcoin-linked ETFs.
However, the exchange group has already quietly worked with partners to launch exchange traded notes linked to bitcoin and Ethereum on its Scandinavian exchanges, where regulators have permitted these innovations.
And the discussions inside Nasdaq about potential retail bitcoin products have accelerated after the CME and Cboe Global Markets each launched futures contracts linked to bitcoin last year.
Retail investors can already trade existing bitcoin futures through retail brokerages such as TD Ameritrade and ETrade and the latest data from the Commodity Futures Trading Commission, the regulator, show interest from retail investors, even though Cboe’s future, for example, requires an outlay of more than $10,000 based on the current bitcoin price.
Until recently, Nasdaq was wary of jumping into the sector since its senior officials feared that the structure of the unregulated digital currency market left retail investors at a deep disadvantage.
One problem is that when an investor buys or sells bitcoin at present, brokers usually only offer “indicative” price, rather than stop limits, meaning that brokers cannot guarantee the price at execution. The market is also prone to technical glitches, particularly when volumes are high, and transparency is low.
“There are a lot of opportunities to improve the market structure as it exists today,” Ms Friedman said. “Other instruments [in finance] have matured into a mode which is offered to retail investors. There is room for this to happen in cryptocurrency. We will only launch a product if we can make it much better.”
The initiative comes as the financial establishment is looking for ways to play a part in the rise of cryptocurrencies, which gathered pace with bitcoin’s sharp appreciation last year, where trading volatility stands in sharp contrast to the placid markets for traditional assets.
Nasdaq rivals Cboe Global Markets and CME Group already have rolled out their own bitcoin futures contracts.
“We are looking to create a product geared to investors, not traders, as an investible asset,” Ms Friedman told the Financial Times, adding that what she is calling a “digital gold” model might be the most effective precedent to use when structuring retail-friendly products.
She described digital gold as a store of value that would exist alongside other “real” currencies, rather than a fully fledged currency in its own right. Nasdaq wants its product to be a vehicle for long-term investment rather than trading or arbitraging against moves in bitcoin.
Nasdaq has previously expressed interest in bitcoin futures. While it did not offer specifics, a total return future is a type of derivative that mimics a privately-negotiated swap, but is traded on a regulated exchange.
Nasdaq is also likely to create a bitcoin index, which might pave the way for exchange traded products, further broadening the retail appeal for digital currencies. CME has a bitcoin reference rate and Intercontinental Exchange recently unveiled plans to create a consolidated price data feed for cryptocurrencies.
Nasdaq officials stress that they have not yet taken any formal decision about when they might unveil this move, not least because US regulators have been opposed to bitcoin-linked ETFs.
However, the exchange group has already quietly worked with partners to launch exchange traded notes linked to bitcoin and Ethereum on its Scandinavian exchanges, where regulators have permitted these innovations.
And the discussions inside Nasdaq about potential retail bitcoin products have accelerated after the CME and Cboe Global Markets each launched futures contracts linked to bitcoin last year.
Retail investors can already trade existing bitcoin futures through retail brokerages such as TD Ameritrade and ETrade and the latest data from the Commodity Futures Trading Commission, the regulator, show interest from retail investors, even though Cboe’s future, for example, requires an outlay of more than $10,000 based on the current bitcoin price.
Until recently, Nasdaq was wary of jumping into the sector since its senior officials feared that the structure of the unregulated digital currency market left retail investors at a deep disadvantage.
One problem is that when an investor buys or sells bitcoin at present, brokers usually only offer “indicative” price, rather than stop limits, meaning that brokers cannot guarantee the price at execution. The market is also prone to technical glitches, particularly when volumes are high, and transparency is low.
“There are a lot of opportunities to improve the market structure as it exists today,” Ms Friedman said. “Other instruments [in finance] have matured into a mode which is offered to retail investors. There is room for this to happen in cryptocurrency. We will only launch a product if we can make it much better.”