From the Regulators

Dealers and advisors must perform their own due diligence before recommending these products to their clients

By James Langton |

 

Canadian securities regulators are warning both dealers and investors about the heightened risks of trading in cryptocurrency derivatives.

The Canadian Securities Administrators (CSA) on Monday issued a reminder ldealers and investors about the inherent risks associated with products linked to cryptocurrencies, such as bitcoin.

The alert follows the launch of trading in bitcoin futures contracts on derivatives exchanges in the United States.

"While these contracts may be traded on regulated exchanges and may be cleared by regulated central counterparties, the fact remains that their high level of risk will not be suitable for all types of investors," the CSA says in its announcement.

Registered dealers and advisors "must perform their own due diligence on these cryptocurrency-linked products before recommending them to their clients," the CSA adds.

"More specifically, the underlying value of these futures contracts is based on trading occurring on markets for cryptocurrencies which are largely unregulated," explains Louis Morisset, chairman of the CSA and president and CEO of the Autorité des marchés financiers, in statement.

"Therefore, there may be some circumstances such as price volatility in the underlying markets, which may lead to consequences such as sudden and significant margin calls in the futures market," he adds.

The CSA "will continue to follow developments surrounding these initiatives," it says.

Last week, the Investment Industry Regulatory Organization (IIROC) announced that it is imposing larger margin requirements on cryptocurrency futures.

Read: IIROC imposes higher margin requirements for cryptocurrency futures contracts

 

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