Subject: SR-NYSEArca2019-39
From: Professor Les Oxley

January 7, 2020

Dear SEC 

We would like to draw your attention to the following paper: 

Hu, Yang and Hou, Yang and Oxley, Les, What Role Do Futures Markets Play in Bitcoin Pricing? Causality, Cointegration and Price Discovery From a Time-Varying Perspective (August 26, 2019). Available at SSRN: or 

of which we are the authors, which relates to the latest published evidence on the (Granger) causal links between the spot and futures pricing of Bitcoin. 

In particular, using the most flexible modelling approaches applied to the spot and future price of Bitcoin we conclude the following based upon data from the CBOE and CMR markets from December 2017 to June/July 2019: 

1. The results from the CBOE and CME futures prices Granger generally cause the underlying spot prices (and not the other way round). 

2. For the CBOE market, the CBOE futures prices Granger causes the underlying spot market prices between August/November 2018 and June 2019, with no causality evidence running from spot to futures markets. 

3. For the CME market, there is a very short causality episode running from the spot to the futures prices from March - June 2019. 

4. These episodes of causality running from the spot to futures prices in the CME market are short and occasionally bi-directional (spot to future and future to spot). 

5. The Bitcoin futures markets dominate the price discovery process using a time varying version of an information share measure of both the IS and GIS types. Both types indicate that price discovery takes place in the Bitcoin futures markets rather than the spot market. 

6. Based on the results in the paper, apart from some short periods to the contrary, the overwhelming evidence is that the Bitcoin futures prices cause/lead the spot prices as one would expect of an informationally efficient market.  

7. The futures contracts can act as an efficient tool for risk management of the underlying spot price. 

Dr Yang Hu; Dr Greg (Yang) Hou and Professor Les Oxley. 

Please feel free to upload this email and the link to our paper to your online portal of comments relating to SR-NYSEArca2019-39