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2018issue C0427

Contract selection is the first filter on competing bitcoin futures

Two bitcoin futures listings can split liquidity and leave a broker able to offer only one product. Unit size, cash settlement, and remaining bid-ask width then decide whether the order is executable.

  • Two competing bitcoin futures listings split liquidity across venues and can leave a given broker able to offer only one of the two products.
  • Platforms that search futures by commodity name rather than by ticker can send an order into the five-unit bitcoin contract when the one-unit contract was intended, or the reverse.
  • Both versions were cash-settled, so expiration adjusted accounts in currency, but a fragmented broker-quoted spot market could add slippage if a position was held into expiration.
  • The five-unit book often implied a larger cash spread cost than the one-unit book, and sparse early volume left fill quality poor, a growing-pain pattern that can last months or years.
Entries in this reading3 entries
Current trackCommission analysis37 readingsFutures contract selection57 readingsLiquidity filter118 readings

Split listings constrain broker access

Two competing bitcoin futures listings split liquidity across venues and can leave a given broker able to offer only one of the two products.

A split listing is two venues listing futures on the same new underlying, which divides order flow. The practical limit is a broker access constraint: not every intermediary can route both competing bitcoin futures.

Commodity-name search can select the wrong unit size

Platforms that search futures by commodity name rather than by ticker can send an order into the five-unit bitcoin contract when the trader intended the one-unit contract, or the reverse.

Unit size is how many units of the underlying one futures contract represents. It scales both exposure and the quoted spread into a cash cost.

Cash settlement still needs a mapping to spot

Both bitcoin futures versions were cash-settled, so expiration adjusted accounts in currency and did not deliver the digital asset or require a wallet. Cash settlement closes the futures in currency against an exchange cash reference instead of delivering the digital asset.

Because cash bitcoin was quoted across many synthetic broker markets rather than one centralized print, the futures cash-settlement price was hard to map to a single transparent spot and could add slippage if positions were held into expiration. That extra mark-to-market friction is expiration slippage, when a cash-settlement print is drawn from a fragmented, broker-quoted spot market.

Spread width becomes a cash cost through unit size

The five-unit bitcoin futures often showed a bid-ask near 50 price units, implying about 250 currency units of spread cost to complete a trade. Implied spread cost is bid-ask width multiplied by unit size, the hidden friction of crossing a thin book.

The one-unit bitcoin futures typically quoted a narrower 20-to-40 unit bid-ask and drew more speculative volume, yet remained wider than a one-tick equity-index futures market of 12.50.

Sparse early volume leaves fill quality poor

Sparse early volume in the newly listed bitcoin futures produced wide books and poor fill quality. Fill quality is how closely an executed price matches the visible quote when volume is sparse.

That growing-pain pattern can last months or years and sometimes ends in delisting.

Listed futures are not a cash-market transfer

Listed bitcoin futures sat in a regulated market with exchange-level trade guarantees, unlike unregulated cash-market bitcoin transfers.

Dollar cost to cross the bid-ask on early bitcoin futures

Crossing CME’s five-bitcoin BTC cost about $250 because a $50 quoted width scaled by the five-coin multiplier, while Cboe’s one-bitcoin XBT sat between $20 and $40 and the e-mini S&P was a $12.50 tick. Those are the cash costs Garner stated in the April 2018 column, printed in prose rather than as a table or plotted series.
Crossing CME’s five-bitcoin BTC cost about $250 because a $50 quoted width scaled by the five-coin multiplier, while Cboe’s one-bitcoin XBT sat between $20 and $40 and the e-mini S&P was a $12.50 tick. Those are the cash costs Garner stated in the April 2018 column, printed in prose rather than as a table or plotted series.CME BTC and Cboe XBT bitcoin futures versus E-mini S&P 500 · April 2018 column, early listing period

BTC width was described as generally around $50 and then scaled by the five-bitcoin multiplier to $250. XBT was given only as a $20–$40 band, so both ends are plotted instead of a midpoint.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
28 of 32 in the Commission analysis track
201858-58 pp.Next on Commission analysisFilter futures execution by liquidity and marginRelative futures liquidity is scored from contract point value, a three-year maximum price move, open interest, and a volume adjustment, then ranked by how readily that interest can be transacted.
All readings on this track · 32 readings
  1. 1985Matching ticket size to negotiable commission schedules
  2. 1985Minimum tickets can price a small book out of its own exit
  3. 1992Stop-order slippage as an execution cost filter
  4. 1993Cost-aware walk-forward evaluation of pattern-detector signals
  5. 2001Audit high-turnover operating conditions as one procedure
  6. 2002Front-load futures commission and slippage
  7. 2005Inactive account fees as hidden implementation cost
  8. 2010A pre-trade liquidity screen for futures contracts
  9. 2011Currency option venues, spreads, clearing, and premium cost
  10. 2012Filter futures contracts by liquidity and implementation cost
  11. 2012Futures commission versus one tick of cost
  12. 2012Ranking futures liquidity for executable orders
  13. 2013Filter option day trades by spread, volume, and fees
  14. 2013Filter futures by liquidity, open interest, and effective margin
  15. 2014Book futures data fees as implementation cost
  16. 2015Use a futures liquidity rank as a pre-trade checklist
  17. 2015Filter unexecutable futures by liquidity, open interest, and margin
  18. 2015Futures liquidity ranking as an execution filter
  19. 2015Filtering option trades by bid-ask width
  20. 2016Exchange quote fees as execution costs and liquidity filters
  21. 2016Filter futures by liquidity, open interest, and margin cost
  22. 2016Comparing dollar-index futures execution costs and liquidity
  23. 2016A futures liquidity ranking as a screen for executable orders
  24. 2017Filter a futures board by liquidity, open interest, and implementation cost
  25. 2017Filter futures contracts by liquidity and margin cost
  26. 2017How residency rules raise futures implementation costs
  27. 2018Screen listed futures by liquidity, open interest, and margin
  28. 2018Contract selection is the first filter on competing bitcoin futures
  29. 2018Filter futures execution by liquidity and margin
  30. 2018Commission analysis for brokerage execution costs
  31. 2019Ranking futures liquidity before you size the order
  32. 2020Brokerage selection as an implementation-cost problem
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