The US Commodity Futures Trading Commission (CFTC) has granted blockchain startup LedgerX its official registration as a designated contract market (DCM), helping solidify its regulatory profile and effectively allows the company to offer physically settled Bitcoin futures contracts.
Crypto platforms such as Bakkt, ErisX, Seed CX, and CoinFLEX have announced the same products, but LedgerX has become the first US company to offer such a service. LedgerX also has an advantage over its rivals as its been trading similar products longer than anyone else.
The established futures exchanges, including those run by Cboe Global Markets and CME Group, already offer bitcoin futures, but they are cash settled, meaning the actual cryptocurrency does not change hands.
But the new operations at LedgerX, which involves the transfer of the cryptocurrency instead of cash, would provide direct access to the digital asset by putting the actual Bitcoins in the customer’s account at the end of the trade.
This allows market makers to effectively hedge their exposure across multiple exchanges. And as for security issues, there have been concerns that the cash-settled process can be manipulated too easily.
The crypto community reacted to the announcement with excitement, saying that the CFTC may pave the way to the much anticipated Bitcoin Exchange-Traded Fund (ETF).
LedgerX’s already has licenses to offer centralized clearing capabilities that also allow the New York-based firm to both trade and clear Bitcoin options. LedgerX said at the time it plans to launch bitcoin derivatives for institutional investors, but it could also offer retail investor products.
We are approved to open up #bitcoin derivatives trading to retail investors! Official Order of Designation by the United States of America @CFTC https://t.co/2cxQDCKwla
— LedgerX (@ledgerx) June 25, 2019
As a registered DCO, LedgerX is authorized to provide its suite of clearing services with respect to swaps, subject to certain requirements; and futures and options on futures contracts traded on or subject to the rules of a designated contract market.
LedgerX beats Bakkt
LedgerX was also granted an exemption from complying with certain CFTC regulations due to its fully-collateralized clearing model. More specifically, its Bitcoin options platform isn't required to undertake monthly stress tests of its financial resources to ensure that it could withstand the default of its largest participant.
LedgerX is aiming to become the first approved facility where physically-settled instruments on Bitcoin can be listed and cleared. Many in the crypto industry voiced their support, citing the potential benefits of hedging against market risk and the ability to gain insight into market sentiment and Volatility .
LedgerX’s main rival, Bakkt, announced earlier this month that its ICE-backed platform would begin testing its much-anticipated Bitcoin futures contracts on July 22. Although still pending CFTC’s approval, the announcement was a strong indication on how the startup is confident to settle the remaining issues with the US regulators.
The US Commodity Futures Trading Commission (CFTC) has granted blockchain startup LedgerX its official registration as a designated contract market (DCM), helping solidify its regulatory profile and effectively allows the company to offer physically settled Bitcoin futures contracts.
Crypto platforms such as Bakkt, ErisX, Seed CX, and CoinFLEX have announced the same products, but LedgerX has become the first US company to offer such a service. LedgerX also has an advantage over its rivals as its been trading similar products longer than anyone else.
The established futures exchanges, including those run by Cboe Global Markets and CME Group, already offer bitcoin futures, but they are cash settled, meaning the actual cryptocurrency does not change hands.
But the new operations at LedgerX, which involves the transfer of the cryptocurrency instead of cash, would provide direct access to the digital asset by putting the actual Bitcoins in the customer’s account at the end of the trade.
This allows market makers to effectively hedge their exposure across multiple exchanges. And as for security issues, there have been concerns that the cash-settled process can be manipulated too easily.
The crypto community reacted to the announcement with excitement, saying that the CFTC may pave the way to the much anticipated Bitcoin Exchange-Traded Fund (ETF).
LedgerX’s already has licenses to offer centralized clearing capabilities that also allow the New York-based firm to both trade and clear Bitcoin options. LedgerX said at the time it plans to launch bitcoin derivatives for institutional investors, but it could also offer retail investor products.
We are approved to open up #bitcoin derivatives trading to retail investors! Official Order of Designation by the United States of America @CFTC https://t.co/2cxQDCKwla
— LedgerX (@ledgerx) June 25, 2019
As a registered DCO, LedgerX is authorized to provide its suite of clearing services with respect to swaps, subject to certain requirements; and futures and options on futures contracts traded on or subject to the rules of a designated contract market.
LedgerX beats Bakkt
LedgerX was also granted an exemption from complying with certain CFTC regulations due to its fully-collateralized clearing model. More specifically, its Bitcoin options platform isn't required to undertake monthly stress tests of its financial resources to ensure that it could withstand the default of its largest participant.
LedgerX is aiming to become the first approved facility where physically-settled instruments on Bitcoin can be listed and cleared. Many in the crypto industry voiced their support, citing the potential benefits of hedging against market risk and the ability to gain insight into market sentiment and Volatility .
LedgerX’s main rival, Bakkt, announced earlier this month that its ICE-backed platform would begin testing its much-anticipated Bitcoin futures contracts on July 22. Although still pending CFTC’s approval, the announcement was a strong indication on how the startup is confident to settle the remaining issues with the US regulators.
