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Four major cryptocurrency exchanges have received subpoenas from the CFTC for the release of the trading data. The subpoenas were part of the ongoing investigation of price manipulation in cryptocurrency exchanges. In particular, the trading data of the Bitcoin exchanges that provide price feed to the CME has been requested.
The regulators have gone forward in issuing the subpoenas based on the request from the CME in December. The exchanges which provide the price feed are Bitstamp, Coinbase, itBit, and Kraken. However, the exchanges have responded negatively to the request, citing privacy and security concerns.
After CME restricted trading activities, a limited amount of data was shared with by the aforesaid exchanges. This raised concerns with the CFTC (Commodities and Futures Commission), which governs CME. The CFTC and CME are of the opinion that manipulation in private exchanges could cause a skew in the regulated derivative exchanges. It is a known fact that the futures price of an asset is derived from the price of the underlying asset traded in the cash market. In case of Bitcoin and other cryptocurrencies, the exchanges are run privately without any regulatory oversight. CFTC believes the move into Bitcoin futures as “risky but worthwhile”.
CME’s agreement with the private exchanges does not have a clause to share trading data. 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.
In fact, CME is dependent on a third-part index data provider which receives market data, calculates the index price for Bitcoin, and routes it to the exchange. The index data provider has agreements with exchanges to share price data.
CFTC and CME’s probe aims to identify price manipulation, if any, in the cryptocurrency market. There have been complaints in various forums about large volume traders or ‘whales’ who use techniques such as spoofing to rig the price of Bitcoin and other cryptocurrencies.
Commenting on the subpoenas, CME spokeswoman Laurie Bischel said
“All participating exchanges are required to share information, including cooperation with inquiries and investigations.”
Bitstamp and Coinbase has not issued any comment. Kraken’s Chief Executive Jesse Powell said the CFTC’s investigation on the prices
“has the spot exchanges questioning the value and cost of their index participation. If there is any kind of attempted manipulation, whoever is doing it is taking a huge amount of risk for very little possible upside.”
