by Alexandra Sayapina
The bank joins its rival Goldman Sachs and becomes the second major Wall Street firm to launch clearing crypto contracts.
Wall Street has always been suspicious of cryptocurrencies. Influential companies rejected working with Bitcoin and demonstrated the lack of trust in its prosperous future. The first Bitcoin futures have expired – and Goldman Sachs Group Inc. started clearing Bitcoin futures contracts.
One more major Wall Street firm recently joined its rival – Morgan Stanley Chief Financial Officer Jonathan Pruzan has announced in a telephone interview to Bloomberg that the company has been clearing Bitcoin futures contracts for big institutional clients.
Bitcoin futures contracts were launched in December 2017 by CBOE Global Markets Inc. and CME Group Inc. Wall Street did not make haste to respond to this event. The cryptocurrencies have shaky reputation due to their extreme volatility. But the futures contracts went live and gained the needed level of support.
Some important brokers like TD Ameritrade, E*Trade and Interactive Brokers provided their customers with the access to the bitcoin futures contracts. Finally, a Wall Street giant Goldman Sachs decided to go with the wave and offer its clients clearing this type of contracts.
Morgan Stanley has followed the example of its competitor and started clearing the bitcoin futures contracts. Jonathan Pruzan commented on this decision: “If someone wants to do a trade on the futures and settle in cash, we’ll do that. I wouldn’t say it’s been a lot of activity, but it’s for core institutional clients who want to participate in a derivatives transaction.”
The official did not disclose the conditions for clearing the transactions. However, he admitted the fact that the volatility of an asset class is taken into account when setting margin levels. Goldman Sachs shared more information on their approach to the new service.
The firm set strict conditions for some of its clients: they are demanded to set aside funds equal to the full value of their Bitcoin futures trade. That helps Goldman Sachs in deterring some customers.
The cryptocurrencies are going through a rough time. The beginning of January brought some unpleasant surprises like a crushing decline in the total value of the cryptocurrency market. At the moment the tendency seems to change: popular currencies show signs of recovery.
In February the second two month Bitcoin futures contract is to expire. That fact, in addition to the two major firms already providing the new service, may cause some notable decisions on Wall Street.
Morgan Stanley seems to be optimistic about the future of the cryptocurrency market. Jonathan Pruzan mentioned in his interview the fact that executives of the firm are considering other ways of interaction with the cryptocurrencies.
That may be even more intriguing, because in the end of Decemeber 2017 one Morgan Stanley analyst James Faucette made a statement that had high resonance.
In his research note “Bitcoin Decrypted” he said that the value of Bitcoin could actually be zero. However, the latest decision of Morgan Stanley seems to demonstrate trust in the future of cryptocurrencies.