CBOE plans Bitcoin futures contract

Chicago Board Options Exchange parent CBOE Holdings is getting into the bitcoin market in collaboration with the Winklevoss twins, best known for their role in the birth of Facebook.

Chicago-based CBOE, which also operates a young futures exchange, aims to launch a bitcoin futures contract later this year or early next year using market data from the twins’ New York firm, Gemini Trust, they said in a statement today. The new contract will be subject to Commodity Futures Trading Commission approval.

As part of the agreement announced today, CBOE gains an exclusive license to tap the bitcoin data generated by Gemini‘s digital currency trading platform to develop derivatives and indexes. CBOE spokeswoman Suzanne Cosgrove declined to comment on how much CBOE is paying, if anything, for the exclusive license from Gemini.

CBOE is beating its larger crosstown cousin CME Group to the punch with the new product in what the statement called a $100 billion cryptocurrency market. CME, which operates the world’s largest futures exchange, has also developed a bitcoin index and bitcoin reference rate, but not a futures contract based on the currency.

“We very much look forward to responding to the growing interest in cryptocurrencies through the creation of bitcoin futures traded on a regulated derivatives exchange, with the many expected benefits that this brings, including transparency, price discovery, deep liquidity and centralized clearing,” CBOE CEO Ed Tilly said in the statement.

As the digital currency is taken up by more traditional institutions, it’s become a regular topic of discussion at derivatives conferences, even if naysayers continue to question its validity. In addition to the exchanges, one of Chicago’s biggest traders, DRW Trading founder Don Wilson,previously dabbled in the area with a bitcoin related startup.

Gemini is led by Tyler and Cameron Winklevoss, who gained fame in their legal battle with Facebook CEO Mark Zuckerberg over the founding of the social media giant.

CBOE’s recently acquired Bats teamed with the twins on a separate application for a bitcoin exchange-traded fund. The Securities & Exchange Commission rejected an initial application earlier this year, but has agreed to review it on appeal, Cosgrove said.