LedgerX Secures CFTC Nod For Physically Delivered BTC Futures Contracts
Crypto exchange and clearinghouse LedgerX obtained the green light from the US Commodity Futures Trading Commission (CFTC) to launch physically settled Bitcoin futures contracts. Thus, the company exceeded Bakkt and ErisX, which are waiting for the CFTC for similar Bitcoin-related derivatives.
LedgerX Obtains DCM License
On Tuesday, the CFTC announced that it had granted the license to the New York-based LedgerX for designation as a contract market. The agency said:
Effective June 24, 2019, LedgerX is also registered as a designated contract market (DCM) under Section 5 of the Commodity Exchange Act (CEA) and Part 38 of the CFTC’s regulations. With registration as a DCM, LedgerX will be required to demonstrate continued compliance with all applicable provisions of the CEA and CFTC regulations, including Part 38.
In 2017, Chicago-based CBOE and CME became the first exchange operators to offer trading services for Bitcoin futures contracts. However, these are cash-settled futures, meaning that they are paid out in US dollars at the expiration of the contract. So far, no company has offered Bitcoin futures with physical delivery, and LedgerX becomes the first platform to do so. Some experts agree that cash-settled futures are more prone to manipulation schemes while the CFTC finds it more difficult to peg crypto futures contracts to cash.
CFTC’s approval also suggests the LedgerX can also provide its Bitcoin futures contracts to retail investors besides the institutional ones.
While the deadline of the upcoming trading service is unknown, LedgerX’s chief operating and risk officer Juthica Chou told crypto news portal CoinDesk that the firm was aiming to become the first one to offer this kind of trading product. She stated:
There’s no doubt that we’re looking to be first, we’re looking to be the incumbent. We think we’re better positioned and we want to be there to serve customers of all sizes.
LedgerX Asks For Patience
LedgerX, which already offers crypto swaps and options contracts for clients, applied for the designated contract market license in November of last year. The company has experience in handling these formalities as it had already obtained the Swap Execution Facility (SEF) and Derivative Clearing Organization (DCO) licenses, which allow it to operate the swap exchange platform and the clearinghouse. The DCO license will fit the bill when it comes to storing Bitcoin securely for the physical delivery when the futures contracts expire.
The new DCM license comes with the same list of responsibilities that the first two have, but obtaining it was a rather difficult process, Chou revealed.
The company is now looking to gradually deploy its Bitcoin futures trading infrastructure, including its Omni platform, which is aimed at retail investors.
We want to be careful and conservative so we’ll soft-launch the Omni product. We’ll take customer feedback and we’ll make sure it works.
While LedgerX has the new DCM license, the company said that it also had a long waitlist. Thus, the launch will be carried out slowly and requires customers’ patience. The platform operator has to test and watch the technologies during the working process and ensure that the customer experience has no flaws.
The Omni platform will allow retail investors to trade Bitcoin, Bitcoin options, and Bitcoin futures. Only US and Singapore citizens are eligible to register the platform, which requires a minimum deposit of $10,000 or 1 BTC.
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