Morgan Stanley to offer bitcoin swap trading



Another of the world’s largest investment banks is quietly building a product that will allow its clients to trade bitcoin, at least indirectly.

Morgan Stanley, the sixth-largest bank in the U.S. by assets, is joining Wall Street’s race toward an institutional-friendly bitcoin derivative, Bloomberg reported on Thursday, citing a person familiar with the matter. The financial institution is creating a proprietary derivatives product that will give traders “synthetic exposure” to the price of bitcoin. These derivatives would allow investors to indirectly invest in the market’s flagship currency, allotting them the option to buy into long or short positions through the contracts.

From the report:

“The U.S. bank will deal in contracts that give investors synthetic exposure to the performance of Bitcoin, said the person, who asked not to be identified because the information is private. Investors will be able to go long or short using the so-called price return swaps, and Morgan Stanley will charge a spread for each transaction, the person said.”

The report further indicated that Morgan Stanley, whose CEO — James Gorman — said earlier this year taking their prices from bitcoin futures, the swaps will not handle bitcoin directly through the bank. Seeing as Morgan Stanley is a regulated and established financial institution, tying the product to futures contracts is a safer bet than basing them on bitcoin’s spot price, as the Chicago Mercantile Exchange and Chicago Board of Exchange offer fully-regulated bitcoin futures from which Morgan Stanley can pool pricing data.

Bloomberg’s source claimed that the derivatives are ready for launch, but it’s waiting on an in-house approval process and sufficient investor demand before taking them to market.

However, Morgan Stanley’s spokesperson has declined to comment on the developments.

Last week, Business Insider reported that rival Goldman Sachs Group Inc was ditching plans to open a desk for trading cryptocurrencies, as the regulatory framework for crypto remains unclear.
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