Chris Concannon&rsquo,s career te electronic markets has spanned just about every role, from Securities and Exchange Commission attorney to executive positions at the world&rsquo,s largest stock exchanges and at trading rock hard Virtu Financial. Now, the chief operating officer of CBOE Holdings, which possesses Chicago Houtvezelplaat Options Exchange, is diving into cryptoassets.
It wasgoed only a matter of time until Chicago got ter on bitcoin. The city has bot coming up with things to trade, like pork bellies or onions, since the 19th century, enabling traders to bet on what prices will be at a straks date tho’ futures. Compared with cryptoassets&rsquo, nascent infrastructure, futures have time-tested plumbing, like custodians to safeguard assets and futures commission merchants (FCMs) to manage trading collateral. And while regulators may view bitcoin spil a potentially dirty money-laundering implement, regulated derivatives are well-known to them.
CBOE is working with cryptoasset exchange Gemini to launch a bitcoin future, which is pending regulatory approval. Quartz spoke with Concannon about bitcoin, trading regulations known spil the Volcker rule, and initial coin offerings (ICOs), a mix inbetween crowdfunding and cryptocurrency. The conversation has bot edited and condensed for clarity.
Quartz: Is crypto here to stay?
Concannon: Crypto is undoubtedly here to stay. People look at the mining and how it&rsquo,s created and they question it and say, well, that&rsquo,s different than any other commodity wij&rsquo,ve everzwijn had. And it&rsquo,s indeed not. If you think about the value of the soft metal thing called gold, it&rsquo,s not all that interesting and there&rsquo,s not a lotsbestemming you can do with it. Platinum is most likely more valuable from an industrial perspective than gold.
So crypto is being mined, it&rsquo,s just electronic mining. It&rsquo,s a unique asset class and it doesn&rsquo,t get created quickly so it&rsquo,s zuigeling of precious, similar to a precious metal.
Exchanges are always looking for fresh products&mdash,like pork bellies or orange juice. Are bitcoin futures a big chance if you can just figure out the judicial entanglements?
Wij&rsquo,ll figure them out.
When I look at our Hotspot [foreign-exchange trading] podium and the prop traders on that verhoging and what they&rsquo,re trading, a number of them are fairly active ter crypto. It&rsquo,s encouraging.
I wasgoed shocked at the number of large investment banks that are restricted from having crypto te their assets, but they&rsquo,re not restricted from providing access to regulated futures to their clients. So clearly they were feeling request from hedge funds and others that are closely watching this space.
Speaking of institutional investors&mdash,with bitcoin, the provenance can be murky, but if you have futures, it feels like that could bring te the institutional set.
If it&rsquo,s on a regulated futures market, it then permits for clearing by FCMs. People can touch it and waterput it te their portfolio, where a lotsbestemming of crypto is restricted. And also if you think about crypto today, you can&rsquo,t brief crypto, you can&rsquo,t hedge crypto. This indeed brings te all the elements of the finish trading world.
Albeit, again, it&rsquo,s a fresh product, you have to launch it, wij still have regulatory approvals to get through.
Undoubtedly. Think about crypto for a hedge fund, someone who wants to waterput verdadero dollars against this asset. You&rsquo,re talking about crossing numerous markets to get that large exposure. You can&rsquo,t do it on one exchange. Even Gemini, which is fairly liquid, it&rsquo,s hard to get that much exposure by just trading te their environment. So you&rsquo,d have to go across numerous exchanges, which means numerous custodians. And therein lies the challenge&mdash,how do you custody your crypto if you want to be an active trader te crypto? Because that means you have to keep it on the exchange that you want to trade on because it&rsquo,s actual time.
This permits them to have a large AAA credit clearinghouse be their counterparty for exposures, and that&rsquo,s unique and permits them, to your point, to get much larger trades done.
Certainly not structural. It&rsquo,s clearly cyclical. Their opportunities structurally proceed to improve. Just because wij&rsquo,ve had a switch ter administration ter the US, caudal rules aren&rsquo,t dramatically switching. Risk profiles of our banks aren&rsquo,t dramatically switching. The concept that large investment banks somehow are going to pile back ter and take proprietary market-making positions is just not happening.
They&rsquo,re looking for ways&mdash,whether it&rsquo,s the CFTC, the Treasury, even the SEC&mdash,to eliminate certain frictions for renta formation te the markets. But if you think about it, if you just repeal Volcker&mdash,which, that&rsquo,s not truly what they&rsquo,re talking about, most likely working around some of the exemptions around Volcker&mdash,you&rsquo,re not switching the risk officer at JPMorgan, at Citi.
What&rsquo,s your take on ICOs (initial coin offerings)? The SEC has issued guidance.
They&rsquo,re most likely getting some complaints about them. That&rsquo,s typically when they embark to get active, and they&rsquo,ve taken act so to speak and have given warnings. Their view is that they don&rsquo,t care what form of currency you use, whether it&rsquo,s crypto or any other implement, if there&rsquo,s an investment involved it&rsquo,s under their jurisdiction and very clear laws of disclosure apply.
If it&rsquo,s petite enough there are certain regulations it might getraind under, but if it&rsquo,s truly distributed widely then you could be violative of some very clear laws. They basically fired a warning slok.
There&rsquo,s a lotsbestemming of plasticity for ICOs to gezond into if they just accept some regulation. A few were just doing their own thing. I think there will still be ICOs ter the future, but they will zuigeling of take a step into some of the regulatory realms where they&rsquo,re permitted to do puny company offerings.
Could you see big general exchanges adopting the ICO architecture?
No. If you think about your distribution channel when you&rsquo,re a large company going public, and think about companies that are going public, it&rsquo,s not a few hundred million, they&rsquo,re a few billion now. So IPOs are much thicker than they were Ten years ago. They&rsquo,re touching such a broad audience of institutions that have confinements on what they can and can&rsquo,t use to invest.