Pan-Canadian financial regulator Canadian Securities Administrators (CSA) has published a notice reminding dealers and investors of the inherent risks associated with products linked to cryptocurrencies, including futures contracts.
While these contracts may be traded on regulated exchanges and may be cleared by regulated central counterparties, the fact remains that their high level of risk will not be suitable for all types of investors.
Bitcoin futures trading was recently launched by derivatives exchanges operators CBOE Holdings Inc. (NASDAQ:CBOE) and CME Group Inc (NASDAQ:CME).
Louis Morisset, CSA Chair and President and CEO of Quebec financial regulator Autorité des marchés financiers (AMF) stated:
More specifically, the underlying value of these futures contracts is based on trading occurring on markets for cryptocurrencies which are largely unregulated. Therefore, there may be some circumstances such as price volatility in the underlying markets, which may lead to consequences such as sudden and significant margin calls in the futures market.
The CSA stated that ss is the case with every investment, an investor looking to participate in cryptocurrency futures trading should understand all of the risks involved.
The CSA reminds registered dealers and advisers that they must perform their own due diligence on these cryptocurrency-linked products before recommending them to their clients.
The CSA said it will continue to follow developments surrounding these initiatives.
The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets.