CFTC Lets LedgerX Settle Futures in Actual Bitcoin

The Commodity Futures Trading Commission (CFTC) cleared Bitcoin derivatives provider LedgerX to offer physically settled BTC futures contracts to institutional and retail customers.

The small US retail investors can soon buy derivatives that pay out using Bitcoins. This comes after the Commodity Futures Trading Commission (CFTC) cleared BTC derivatives provider LedgerX to provide physically settled Bitcoin futures contracts. On June 25, the CFTC said that it had approved LedgerX’s application for a designated contract market (DCM) license.

That means that the company can now float new futures contracts into the market. LedgerX becomes the second company to offer these physically settled Bitcoin futures. Other firms that plan to enter this market include Seed CX, ErisX, and Intercontinental Exchange’s Bakkt. Although Bakkt’s own futures contracts are self-certified, the firm awaits licensing from the New York Department of Financial Services.

This venture will let the consumers living in the US or in Singapore to sign up to start trading treading in July. Originally, the investors will have to deposit over $10,000 in dollars or Bitcoins. However, Chief Executive Officer Paul Chou said that the minimum deposit will go down to zero within a year.

Unlike the cash-settled Bitcoin futures, in the physically settled futures, buyers get the underlying commodities when a contract expires. They are not compensated with a fiat equivalent. LedgerX’s approval means that the company can list the Bitcoin futures contracts and also offer its products to retail clients. The company has not offered a definite timeline of when it will start operations.

However, Juthica Chou, the chief operating and risk officer said:

“There’s no doubt that we’re looking to be first, we aim to be the incumbent. We think we’re better positioned and we want to be there to serve customers of all sizes. Ultimately the products are not that economically different than what we’re already offering … but this would open up to a wider [market].”

LedgerX applied for this DCM in November 2018 and since then it has worked closely with the CFTC. Currently, it offers swaps and options contracts for its clients. The DCM application comes on top of the company’s existing Derivatives Clearing Organization (DCO) and Swap Execution Facility (SEF) licenses.

This new license has similar responsibilities that the other two licenses have. Chou said that securing the latest license was a difficult process due to various issues involved. LedgerX is now targeting a gradual rollout of its new products that feature its retail-focused Omni platform.

Chou further explained saying:

“We want to be careful and conservative so we will soft-launch the Omni product. We’ll take customer feedback and we’ll make sure it works. We have an extensive waitlist and we’ll work through that until we feel comfortable.”

LedgerX will roll out its existing swaps and options product to every customer. Additionally, it will introduce a new block height option product that the company self-certified recently.