And we have a winner! LedgerX, the first US-regulated company to offer physically-settled Bitcoin futures options ahead of its rivals TD Ameritrade backed ErisX and Intercontinental Backed Bakkt. LedgerX announced the launch of their trailblazing product on social media on Wednesday, July 31st revealing that the product was accessible to both retail and institutional investors based in either the United States or Singapore.
LedgerX received the go-ahead to launch this product from the US regulator the Commodities and Futures Trading Commission (CFTC) last month through the issuance of the Designated Contract Market (DCM) license. This license allows LedgerX to offer fully collateralized futures options. This also means that traders will not be able to legally trade the options on margin.
Bitcoin futures are not really new in the United States. The first of their kind were debuted by the Chicago Mercantile Exchange (CME) back in December 2017 with the Cboe following suit shortly after. The main difference between CME/Cboe’s futures is that the products offered by the two companies are cash-settled meaning that traders can deposit cash and receive cash once the contract expires. All they have to do is speculate on the underlying asset (which in this case is Bitcoin.) on the other hand, with LedgerX’s product, traders will be able to deposit bitcoin and receive bitcoin once the contract has expired. LedgerX CEO Paul Chao said it concisely,
“Cash-settled is cash-in and cash-out, we’re Bitcoin-in and Bitcoin-out.”
TradeBlock’s Director of Research also offers another important distinction between the two types of futures.
“Cash-settled futures contracts could potentially be more susceptible to manipulation depending on the formula, and underlying spot exchanges or indices used for settlement at expiry.”
The Bitcoin futures will be available on the newly launched Omni platform with a minimum limit of 1 BTC or $10,000. As of press time a BTC is trading against the US Dollar for roughly about $9,975. The minimal deposits will allow most retail investors to have access to the platform without overly restricting the service.
“Cryptocurrencies are for everybody and we never started this looking to offer just to hedge funds or institutional clients,” Chou said.
Rival platform Bakkt, which is seeking a trust license from the New York Department of Financial Services (NYDFS) launched its physically-settled bitcoin futures platform last week albeit for testing purposes. The company hopes to launch the actual product later this quarter. It is yet to receive an operating license from the CFTC.