Sunday, 26 May, 2019

CFTC Issues Subpoenas To Four Major Cryptocurrency Exchanges

Dispute Between CME, Crypto Exchanges Prompted CFTC Market Manipulation Probe: Report CFTC Demands Trading Data From Bitcoin Exchanges In Price Manipulation Probe
Ginger Lawrence | 11 June, 2018, 17:59

CME's agreement with the private exchanges does not have a clause to share trading data. In particular, the trading data of the Bitcoin exchanges that provide price feed to the CME has been requested.

The CFTC, the regulatory authority tasked with overseeing CME's bitcoin futures markets, reportedly subpoenaed the exchanges for the data in response to the dispute. Several exchanges chose not to comply, claiming CME's request was invasive.

But after CME restricted the trading activities, these exchanges were forced to share data albeit only a limited amount of data has been shared. If there was such a clause, then all data pertaining to trading such as date and time of all trades, unfilled or cancelled orders, identities of traders, and size of orders would be available to CME on a then and there basis. To get the data, the CFTC purportedly subpoenaed the exchanges.

As noted by The Wall Street Journal, one particularly common form of market manipulation is called "spoofing", which is the practice of entering "large trade orders with the intention of tricking others into thinking there had been a fundamental change in the supply and demand of bitcoin".

According to Wall Street Journal CME had asked for the information through a third party which calculates the Bitcoin price for use in the futures. The contract prices are calculated the last Friday of each month and are based on the average BTC price on the four exchanges over an hour. That request morphed into an investigation of the exchanges and their prices, and the CFTC is now working with the Department of Justice to ascertain if any wrongdoing took place. People who know the matter well told the Journal that CFTC was carrying the investigation together with the US Department of Justice.

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CME offers traders a variety of bitcoin futures for months into the future. CFTC believes the move into Bitcoin futures as "risky but worthwhile".

"All participating exchanges are required to share information, including cooperation with inquiries and investigations". He stated earlier this week that bitcoin market manipulation concerns were overstated, and that anyone attempting to manipulate the market is taking a big risk for minimum benefit.

On CFTC's "newly declared oversight" of prices, he stated that this has the spot exchanges question the cost and value of their index participation.

Bitstamp chose not to comment on the investigation, and Coinbase did not respond to a request for comment.

The investigation is legitimated by bitcoin's designation as a commodity, juridically granting the CFTC jurisdiction over the commodity markets underscoring derivative markets overseen by the regulator.