(Bloomberg) -- Goldman Sachs Group Inc. has a reputation for being one step ahead of its Wall Street rivals. But it wasn't ready for Bitcoin futures.
When two exchanges got the green light in December to list derivatives contracts tied to the suddenly ubiquitous digital coin, Goldman was still mulling whether it was appropriate for its own employees to trade futures, said Rana Yared, a managing director at the firm. Before Goldman had made up its mind, clients started asking the bank to execute their transactions, she said.
At a public meeting held Wednesday in Washington, Yared made clear to the Commodity Futures Trading Commission -- the U.S.'s top derivatives regulator -- that Goldman wasn't exactly thrilled with the quick rollout by CME Group Inc. and Cboe Global Markets Inc.
“The launch of the product by both the Cboe and the CME left us in a very interesting position of having to receive contracts from clients that we ourselves have not made a decision as to how to regard,” Yared said. It's “critical” for major clearing firms like Goldman to be prepared for new contracts so they can “risk manage them appropriately,” she added.
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Yared's comments probably didn't surprise the CFTC. Bitcoin futures came to market through an informal process known as self-certification in which exchanges launch products without a formal review by regulators by pledging that the contracts don't run afoul of CFTC rules.
A trade group representing Goldman and other Wall Street banks has argued the process wasn't appropriate for Bitcoin futures because the underlying digital coins are volatile and all the potential risks involved aren't known.
The CFTC, which has said it had little recourse to stop Bitcoin futures, held Wednesday's all-day meeting to solicit feedback on whether the abbreviated listing process should continue to be used for novel derivatives like those tied to cryptocurrencies.
While Goldman's apprehension wasn't tied to the price of Bitcoin, the firm's cautious approach might have been prescient. Bitcoin is headed for its worst monthly decline in four years and Bitcoin futures are also slumping.
To contact the reporter on this story: Ben Bain in Washington at bbain2@bloomberg.net.
To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Nick Baker
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