Hard Fork Treatment
After the merge, “Ethereum” will refer to the PoS version of the blockchain, and the ETHUSD_RR shall define the value of ether on the PoS chain, or Eth2. If consensus isn’t achieved, stakeholders may propose a so-called “hard fork” or permanent spilt of the blockchain, resulting in two distinct chains: The“old” PoW chain and a new token currently being dubbed “ETHPOW”.
Under their hard fork rules, CF Benchmarks will evaluate any hard fork against a set of pre-defined criteria to determine whether it is significant. If the hard fork is deemed significant, CF Benchmarks will launch a new, but separate, index on the new token pair.
CME Group Ether futures and Micro Ether futures settle to the underlying ETHUSD_RR on the last Friday of the contract month. The settlement date for the September contract is Friday, September 30, suitably after the anticipated merge date.
In the event of a hard fork, standard Ether and Micro Ether futures shall continue to settle to the ETHUSD_RR corresponding to the original token pair (ETHUSD). For clarity, the ETHUSD_RR will track the price of ether on the new PoS blockchain and will not include price activity from the proposed ETHPOW coin.
Market Positioning Ahead of the Merge
As we approach the highly anticipated event, we are seeing investors positioning themselves for the merge. Ether futures and Micro Ether options trading has reached record levels:
- Micro Ether options average daily volume (ADV) in August was more than 5,260 contracts, up over 130% from July.
- Micro Ether options Open Interest reached a record of 124,814 contracts on August 30 while average daily OI in August reached a record of 75,959, up over 135% since July.
- Ether futures ADV reached a record 7,042 contracts in Q3, up +52% from Q3 2021
Ahead of the merge, CME Group announced plans to launch options on Ether futures on September 12, pending regulatory review. Ether options will offer institutional investors greater flexibility and added precision to manage their ether exposure ahead of market moving events.
There may be no more influential crypto event than the merge. With a benchmark reference rate designed to withstand any disruptions, and a clearly defined hard fork policy, futures market participants can be confident in navigating the change effectively.
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