Tougher dealer margin requirements for cryptocurrency futures in Canada

13 December 2017

Now that Bitcoin futures have begun trading on the CBOE, one of the largest futures exchanges in the world, the Investment Industry Regulatory Organization of Canada (IIROC) has issued a notice which provides for greater dealer margin requirements for cryptocurrency futures contracts.

IIROC is prescribing higher margin requirements for cryptocurrency futures contracts than the regular margin required for commodity futures contracts and futures contract options found in the Dealer Member Rules.

The notice states that Dealer Members must mark-to-market and margin exchange-traded cryptocurrency futures contract positions daily at the greatest of (i) 50% of the market value of the contracts; (ii) the margin required by the futures exchange, such as the CBOE, on which the contracts are entered into; (iii) the margin required by the futures exchange's clearing corporation; and (iv) the margin required by the Dealer Member's clearing broker. The margin requirements for the CBOE futures exchange on Bitcoin futures is currently 44% of the current daily settlement price in the case of speculative trading.

This IIROC guidance is effective immediately.

Gowling WLG has become one of the first law firms in Canada to launch a dedicated Blockchain & Smart Contracts Group. Comprising several specialist "crypto" teams with different legal focuses - including capital markets, tax, intellectual property and litigation - the group's work centres on a range of areas related to blockchain technology, such as initial coin offerings (ICOs), smart contracts, crypto-currency exchanges, digital wallets, capital markets transactions, investment funds, regulatory compliance and consumer protection issues.

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