Lukken outlined the risk to clearing members, which include the world’s largest banks. He said they are exposed to the risk of a sharp drop in the value of bitcoin through their contributions to default funds at clearing houses, which sit between traders to guarantee transactions in the event that one side cannot meet its obligations. Contributing to the fund is designed to mutualise risk across several banks to provide a safety net in case of default.
The FIA CEO said there should have been a public discussion on whether to create a separate guarantee fund for the products, or whether exchanges should have put up more capital to absorb losses before the funds provided by clearing members could be touched.
He wrote: “Given the lack of historical data on these products, it is further concerning to clearing members that they will bear the brunt of the risk associated with them through their guarantee fund contributions and assessment obligations, even if not participating in these markets directly, rather than the exchanges and clearinghouses who have listed them.”
He also criticised the process by which bitcoin futures and other products have come to market. He said the process of self-certification allowed “little or no time for public review”.