Bitcoin futures and Micro Bitcoin futures inter-commodity spreads

May 17, 20261 Mins read43

Market participants may now directly execute an inter-commodity spread (ICS) between Bitcoin futures (commodity code: BTC) and Micro Bitcoin futures (commodity code: MBT) contracts on CME Globex. The ICS will help maintain price alignment between the two underlying bitcoin futures contracts and may result in improved bid-ask spreads for the outright contracts.

How it works

The Globex listing convention for the ICS is BTC-MBT, whereby buying the spread means buying leg 1, BTC, and selling leg 2, MBT, at the ratio 1:50, respectively. Conversely, selling the ICS means selling (one) BTC contract and buying (50) MBT contracts. The ICS spread may be negative, zero or positive and will be available across all listed contract month combinations.

The ICS pricing convention is BTC price minus MBT price whereby the BTC price will act as the anchor price based on the most recently available BTC trade. The price for the resultant MBT contracts will be derived as BTC price minus the transacted spread price. Consider the following example:

An investment manager is long three January BTC contracts (representing 15 equivalent bitcoin) which she would like to roll into February. She anticipates that she may need to reduce her holding to 12 equivalent bitcoin but is unsure of the timing. The investment manager may use the ICS to efficiently and seamlessly roll the position from three January BTC contracts to 150 February MBT contracts and then has the flexibility to reduce her MBT position to 120 contracts (12-equivalent bitcoin) when convenient.

Assume the investment manager sees three BTC-MBT spreads bid at -2, she hits the bid thereby automatically and simultaneously selling three BTCF2 contracts and buying 150 MBTG2 contracts. The most recent BTC price was 44,370, resulting in a price of 44,372 for MBT (anchor leg price minus spread price; 44,370 – (-2)). The investment manager’s resultant position is 150 MBT contracts at a price of 44,372 as she successfully rolled her January BTC position into a February MBT position.