Seed CX tests physical settlement of bitcoin swap contracts, scheduled to launch within three months

According to Coindesk's August 14 report, Bitcoin derivatives supplier Seed CX announced on Tuesday that it has begun testing customers with margin swaps.

Screen Shot 2019-08-14 at 10.07.56 AM (Source: Coindesk )

The company said investors can try Seed CX swaps through its subsidiary Seed SEF, a regulated swap execution platform, during testing.

Seed CX CEO Edward Woodford told CoinDesk that the test will allow market participants to test their products “to ensure that work is as expected”.

Brian Liston, president of Seed CX, said in a statement:

We are very excited to let users test the bitcoin derivatives of Seed CX physical settlement, and now it is the last step.

Woodford told The Block that the company may launch real-time swaps in the next three months.

But he clarified to CoinDesk:

We are not sure if we can launch the product within three months and are awaiting approval from the regulatory authorities, so we cannot control the specific launch time of the product.

He then added:

We have already prepared for the technical aspects. Other factors that may affect the launch are the perception of the regulators about these products.

Liston said in a statement that once the swap product was tested successfully and reviewed by regulators, the company "will be able to introduce a digitally-deposited digital asset derivative that requires margin to US customers."

Competitive market

Many companies are seeking to provide physical settlement of Bitcoin derivatives (its potential customers will receive Bitcoin when their contracts expire). So far, in the United States, LedgerX is the only platform that offers swaps and options products. It was previously targeted at institutional investors, but has recently opened to retail investors.

However, Seed CX hopes to be the first company to offer a margin settlement product, which means investors can use leveraged positions.

The company has previously announced its intention to offer bitcoin forward transactions, similar to the bitcoin futures products that Intercontinental Exchange's Bakkt, LedgerX and ErisX wish to offer to customers. TrueDigital is also seeking to launch bitcoin forward transactions.

Futures is a standardized contract that is traded on an exchange, but forward contracts can be customized between the parties and traded off-site. Customers can use two contracts to place a bet on the price of Bitcoin in the future.

According to a press release on Tuesday, Seed CX intends to offer nine different contracts simultaneously: four weekly contracts, three consecutive monthly contracts and two quarterly contracts. The weekly contract will expire on Friday, while the monthly and quarterly contracts will expire on the third Friday of the corresponding month.

Seed CX launched a bitcoin spot trading market in January this year to provide trading and settlement services to institutional clients.