The Commodity Futures Trading Commission (CFTC) has cleared bitcoin derivatives provider LedgerX to offer physically settled bitcoin futures contracts.
The CFTC said Tuesday it had approved LedgerX’s application for a designated contract market (DCM) license, meaning the company can now offer the new futures contracts. LedgerX is the second company to receive approval to offer physically settled bitcoin futures; other firms, such as Intercontinental Exchange’s Bakkt, Seed CX and ErisX plan to enter this market. (While Bakkt’s own futures contracts have been self-certified, the firm is waiting for the New York Department of Financial Services to license its warehouse).
Unlike the cash-settled bitcoin futures listed by the Chicago exchanges Cboe and CME, in physically settled futures the buyer receives the underlying commodity when a contract expires, rather than the fiat equivalent.
Monday’s approval means that New York-based LedgerX can not only list these bitcoin futures contracts but crucially can offer its products to retail clients, not just institutional ones.
No timeline was provided for when LedgerX might start to offer futures. but chief operating and risk officer Juthica Chou told CoinDesk that the company was looking to be the first provider of this product in the U.S.
“There’s no doubt that we’re looking to be first, we’re looking to be the incumbent,” she said. “We think we’re better positioned and we want to be there to serve customers of all sizes.”
LedgerX would follow the same self-certification process that it already underwent to offer swaps and options, Chou said, adding:
“Ultimately the products are not that economically different than what we’re already offering … but this would open up to a broader [market].”
While Bakkt has previously announced that it would be testing its own physically-settled bitcoin futures contracts in July, a firm launch date has yet to be announced. Seed CX and ErisX have likewise not yet announced when they would launch their futures products (or forwards, in Seed CX’s case).
Months-long process
LedgerX applied for the DCM in November 2018 and has since been working with the CFTC. It already offers swaps and options contracts for customers.
The DCM application came on top of LedgerX’s existing Swap Execution Facility (SEF) and Derivatives Clearing Organization (DCO) licenses, which approve the company’s exchange platform and clearinghouse, respectively.
The new license carries with it the same set of responsibilities that the other two have, Chou said, though securing the latest approval “was a pretty difficult process” due to the issues involved.
LedgerX is now eyeing a gradual rollout of its new products, including its retail-focused Omni platform.
“We want to be careful and conservative so we’ll soft-launch the Omni product,” she said. “We’ll take customer feedback and we’ll make sure it works.”
The company will roll out its existing swaps and options product to all customers, as well as a new block height option product which the company recently self-certified.
Chou added:
“We have a pretty extensive waitlist and we’ll work through that until we feel comfortable.”
LedgerX team image courtesy Juthica Chou