CFTC (Commodity Futures Trading Commission) has permitted institutional Bitcoin derivatives platform Ledgerx LLC. The first federally regulated bitcoins options exchange and clearinghouse. Ledgerx tends to start trading Bitcoin options in the fall and Ether options after a few months.
Approval of first Bitcoin Exchange and Clearinghouse
Clearing platform Ledgerx and Institutional Bitcoin derivatives trading founded 2013 has approved by the CFTC as regulated bitcoin exchange and clearinghouse. The commission approved the company as a Swap Execution Facilities (SEF) on Monday as a Derivatives Clearing Organization(DCO).
Ledgerx is the first digital currency platform on both DCO and SEF. On Monday an announcement by the commission:
“By a unanimous vote of the Commission, it has issued an order granting Ledgerx, LLC (Ledgerx) registration as derivatives clearing organization under the Commodity Exchange Act (CEA)…Under the order, Ledgerx will be authorized to provide clearing services for fully-collateralized digital currency swaps”.
A convey by Ledgerx CEO Paul Chou to Reuters that it looks the commission more than two years to grant his company as the two statuses. He is also a part of CFTC’s Technology Advisory Committee. In the month of May, the company established funding of $11.4 million controlled by Miami International Holdings Inc and Huiyin Blockchain Venture Investments.
Before the early fall Ledgerx launch to bitcoins and Ether options, Chou told to CNBC. “Firstly, Ledgerx expects to list one- to six-month option contracts for Bitcoin. Other digital currency contracts such as Ethereum (ETH) options are probably to follow”, he said to Reuters.
Institutional Investors can now enter the space
Reuters quoted Chou saying, “Having a regulated clearinghouse will open the market to a lot of other investors such as large institutions”. Additionally, with the proper regulatory framework along with the investors comfortable and open the market up to them. He commented:
“We are seeing strong demand from institutions that previously could not participate in the bitcoin market due to compliance restrictions against unregulated venues. In particular, there is a desire for fund managers to hold financial instruments that are not correlated with the broader equity market, and digital currencies meet that need”.
Moreover, the CFTC has granted Ledgerx an exemption from section 39 of commodity exchange act. “in acknowledgment to an appeal from Ledgerx, the Commission’s Division of Clearing and Risk also today issued a letter exempting Ledgerx from complying with certain Commission regulations due to Ledgerx’s fully-collateralized clearing model”, the commission wrote.
Without the immunity, Ledgerx a clearinghouse is undertaking monthly stress tests of its financial resources “to ensure that it could withstand the default of its largest participant,” explained by Waters Technology. The reason for exemption is the company’s plan that not to allow vet leveraged trading, Chou told to CNBC.