LedgerX Launches Physically-Settled Bitcoin Futures Ahead of Bakkt and ErisX
This story was updated on August 1, 13:55 UTC
The U.S. Commodities Futures Trading Commission (CFTC) stated that LedgerX has “not yet been approved by the Commission” to offer physically settled bitcoin futures.
Crypto derivatives provider LedgerX announced it has launched the first physically-settled Bitcoin futures contracts on the U.S. market. The contracts, which pay traders out in Bitcoin, will be available to both institutional and retail investors subject to know-your-customer (KYC) procedure.
Retail customers can trade the product using the company’s new Omni platform, while institutional clients can trade futures as with any of LedgerX’s other products.
LedgerX Omni (DCM) has launched! sign up for the waitlist here: https://t.co/VWiua8d3IZ
— LedgerX (@ledgerx) August 1, 2019
Even though LedgerX is not the first Bitcoin futures provider in the U.S., it is the first one offering so called physical futures. That means that customers receive the actual Bitcoin they bet on when the contracts expire, and not fiat money.
LedgerX CEO Paul Chou also confirmed that the contracts can be bought both in U.S. dollars and in Bitcoin.
Speaking to CoinDesk, Chou said:
“Not only are they delivered physically in the sense that our customers can get Bitcoin after the futures expires, but also they can deposit Bitcoin to trade in the first place. Cash-settled is cash-in and cash-out, we’re Bitcoin-in and Bitcoin-out.”
This may be the first time that a government’s supervised firm can actually allow customers to deposit Bitcoin as collateral for a contract without waiting for bank transfers.
“As a digital commodity, Bitcoin trades 24/7/365 and our customers expect that from us, so if you trade Sunday night, the banking system did not have to be open,” added Paul Chou.
LedgerX revealed that it was looking to offer bitcoin futures in April, having filed with the U.S. Commodity Futures Trading Commission (CFTC) for the requisite licenses in November 2018.
The CFTC granted LedgerX a designated contract markets (DCM) license last month, giving the platform the final approval it needed (the company previously had derivatives clearing organization and swaps execution facility approvals through the CFTC).
The company began offering physically-settled Bitcoin derivatives products in 2017. However, its options and swaps products have initially been geared toward institutional customers. Since then, the company has been working to ensure that anybody could trade its products.
“Cryptocurrencies are for everybody and we never started this looking to offer just to hedge funds or institutional clients,” said Chou.
Beating the Rivals
A number of companies are planning on offering physically-settled Bitcoin futures in the U.S. as well
Bakkt, which was set up by the New York Stock Exchange’s parent firm Intercontinental Exchange last year and TD Ameritrade-backed ErisX have both announced their intention to enter the market.
Bakkt has self-certified its contracts through the CFTC, and is now waiting on a trust charter from the New York Department of Financial Services to set up its warehouse. Once the trust charter is approved, Bakkt will likely be able to launch within a few weeks.
The firm conducted user acceptance testing on July 22, ensuring that customers, clearing members and the provider were all able to communicate when trialing the contracts.
ErisX, like LedgerX, has received the necessary CFTC approvals, though it has not announced a timeline for launching its futures contracts. The company began offering a cryptocurrency spot trading market in April 2019.
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