According to Coindesk's September 10 report, Bakkt has officially disclosed that customers must deposit a certain amount of funds in advance for the margin trading of their bitcoin futures products.
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ICE Futures US is the trading platform for Bakkt's physical delivery bitcoin futures contract, which announced initial hedge and speculative requirements for customers and a monthly premium rate in a new announcement on Tuesday.
TradeBlock research director John Todaro told CoinDesk that the initial margin requirement was “the amount of assets (collateral) that needed to be pledged in order to open a position”.
According to Tuesday's announcement, Bakkt requires customers to have an initial hedge margin of $3,900 for daily and monthly futures contracts. The initial requirements for speculative futures will be slightly higher at $4,290.
Todaro said the initial hedge margin requirement is for accounts that already have Bitcoin exposure. He added:
“The speculative requirement is for accounts that speculate on bitcoin price movements through futures contracts. The Commodity Futures Trading Commission (CFTC) and other regulators have regulations in place to protect the futures market from excessive speculation. Over-speculation may Lead to abnormal price fluctuations, etc."
Additional interest rate
Similar to the initial hedging and speculative rates, Bakkt's monthly rate of interest is also different.
Both the monthly and daily futures contracts have a hedging rate of $400-1,000, but speculative rates will fluctuate between $440 and $1,100.
One of the additional notes states that the margin rate will vary based on the maturity date and the “difference in contract expiration date”. Todaro said:
“As the contract trades over time, maintenance contracts become a requirement in order to maintain positions. Depending on market trends, this position may require users to allocate more funds to return the initial margin required.”
The notice also includes a percentage ratio of credit spreads between commodities, which Todaro explained, which is related to “credits in related instruments that can be used to offset positions”.
Given that Bitcoin's current transaction price is around $10,000, Tuesday's announcement is in line with the margin rate predicted by Bakkt's Frequently Asked Questions (FAQ) released last month. Bakkt pointed out in the FAQ that for direct contracts, the initial margin rate is “expected to be about 37%”.
Although Bakkt said in the FAQ that the spread is expected to be between $400 and $800, it does point out that "the ICUS risk department will retain the right to adjust margin levels based on market conditions."
Bakkt is expected to launch a much-anticipated futures contract on September 23, less than two weeks away.
Bakkt first announced in August 2018 that the company did not support margin trading. However, when it announced its September listing date last month, the exchange appeared to have deviated from this plan.
Bakkt CEO Kelly Loeffler had previously told CoinDesk that Bakkt's daily contract would provide margin trading. However, Lufler did not disclose the leverage ratio of these contracts at the time.
The company's vault will host the customer's physical bitcoin and will accept customer deposits starting September 6. The company declined to say how many bitcoins it has received so far and refused to disclose what its bitcoin wallet address is.
At the same time, Tuesday’s announcement stated that these margin requirements were “not yet fully determined”.