According to foreign media reports, bitcoin derivatives supplier LedgerX announced that it has launched its first physical settlement of bitcoin futures contracts in the US on Wednesday. These contracts are paid to the dealer in Bitcoin instead of US dollars and will be offered to institutional investors and retail investors.
Just a few days ago, Bakkt officially entered the Bitcoin Futures Trading and Hosted User Acceptance Test (UAT) stage, although Bakkt previously announced that it will be officially launched as early as the end of September this year, It has been repeatedly postponed and is still not eligible for the official launch of a bitcoin futures contract for physical delivery.
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LedgerX and ErisX have been eligible to launch physical bitcoin futures contracts in late June and early July, although ErisX has not yet announced a timetable for futures contracts.
In contrast, LedgerX "post-production", the first to release the first real bitcoin futures contract in kind. Bakkt, the original high-profile promoter of bitcoin futures for physical settlement, has now completely lost its first mover advantage.
CBOE's Bitcoin futures is currently a typical cash-settled bitcoin futures contract transaction, which is essentially different from a real-time contract that is settled in physical (ie bitcoin). The former is settled in cash. The two parties only need to conduct futures trading within the agreed time according to their respective price forecasts. The exchange only needs to settle the difference between the position and the previous buyer based on the real-time market price after the contract expires. You can do cash delivery.
The bitcoin futures that are settled in cash are criticized because there is no physical support, and the futures and spot linkages are poor. At the same time, since all transactions and settlement processes do not really involve the physical trading of Bitcoin, there is no practical benefit to the circulation of Bitcoin and the long-term development of economies based on digital currencies.
Professionals familiar with Bitcoin futures have told Finance Network. Chain Finance said that futures as a financial instrument anchoring the entity's target, there is no physical delivery of futures contracts, that is, cash delivery, representing the futures delivery date, just two sides A price difference is settled, so theoretically non-physical delivery futures will be more susceptible to manipulation.
Bitcoin futures contracts settled in kind, need to deliver bitcoin, there is real commodity delivery, so the bitcoin futures like LedgerX is considered to be the real bitcoin futures. LedgerX's physical settlement of bitcoin futures contracts does not require dollars, traders can buy contracts with bitcoin, LedgerX CEO Paul Chou believes that this is the first time a regulated company allows customers to deposit bitcoin The collateral for the contract, so the customer does not have to wait for a bank transfer or other restrictions from the US banking system to participate.
Bitcoin futures delivered in kind involve three highly regulated services that are widely available on the exchange today: transactions, clearing, and secure storage in the form of custody or warehouse. According to the previous report of Caijing.com and Chain Finance, in the US derivatives trading market, products such as futures and options based on various underlying assets need to obtain licenses from designated contracted markets (DCM). And the liquidation qualification is certified by the qualification of the Derivatives Clearing Organization (DCO).
Bakkt does not have a DCO license or a DCM license. It has previously obtained a DCO license through the acquisition of digital asset custodian company DACC, and its DCM license is through the parent company ICE's Intercontinental Exchange US Futures Office (ICE Futures US) acquired. And in terms of hosting, Bakkt launched its own delivery warehouse (the “Bakkt Warehouse”).
As a result, the process between its liquidation and custody faces regulatory challenges. Some former CFTC staff pointed out that commodity futures exchanges generally use service providers such as banks or trusts, and contracts are settled in banks or trusts. The relevant assets will be hosted by the clearing house under federal or state government supervision of banks or trusts. Delivery is implemented. Bakkt uses the parent company's clearing house instead of obtaining a DCM license, which involves third-party liquidation. This means that in the CFTC's view, it is likely that the company will not be subject to federal or state regulation, thus causing obstacles to the Bakkt approval process. .
The hosting plan has been the key to whether CFTC approves its bitcoin futures. Currently, Bakkt is awaiting the approval of the New York State Department of Financial Services (NYSDFS) for BitLicense (Digital Money License), expecting its own delivery. The warehouse is thus able to obtain the status of a qualified custodian.
LedgerX, as a regulated compliance futures contract exchange and clearing house, has registered Swap Execution Facility (SEF) licensing and DCO certification in the CFTC as early as July 2017. LedgerX has previously provided customers with The qualification of swap contracts and option contracts. In November 2018, LedgerX applied to the CFTC for the DCM contract market, and on June 24 this year, it obtained the DCM license qualification. The ErisX exchange, backed by TD Ameritrade, one of the largest online brokers in the United States, received a DCM license in November 2011 and a DCO license earlier this month.
LedgerX offers new products to institutional and retail investors, allowing anyone who can trade contracts through the KYC process, not just institutional clients with millions of assets.
According to LedgerX official tweets, the physical delivery bitcoin futures products launched by LedgerX are mainly opened to retail investors through their consumer trading platform Omni. According to the Omni platform, Omni users must recharge at least $10,000 or 1 bitcoin to open an account and are currently restricted to US and Singapore residents.
When the Bitcoin futures contract with cash delivery was launched in December 2017, the Chicago Board of Trade Exchange (CBOE) and the Chicago Mercantile Exchange (CME) quickly responded by issuing a cash-settled bitcoin futures contract, and CBOE eventually rushed to the market. The firm launched the world's first bitcoin futures transaction nine days after it was approved. Now, CME's bitcoin futures contracts have accumulated more than 2 million copies (equivalent to 10 million bitcoins), while CBOE finally chose to stop renewing bitcoin futures contracts after more than a year of launch.
Bitcoin futures, which are delivered in kind, are now on the line. Seizing the opportunity is one aspect, and how to survive better in the investment market is the next proposition.
Author: Xi breeze
Source: Finance and Economics Network on Finance