Chicago-based cryptocurrency derivatives provider ErisX has been granted a derivatives clearing organization (DCO) license by the United States Commodities and Futures Trading Commission as revealed by a blog post by the company on Monday, July 1st.
the DCO license is an addition to its already held designated contract market (DCM) license since 2011. With the latest DCO license, the CFTC has cleared the derivatives provider to offer a crypto derivatives contract market with physically settled underlying assets. The derivatives contracts will be traded on a soon-to-launch derivatives platform later this year. According to the blog post, the soon-to-launch platform,
“Comply with the 17 core principles under the CEA including, among other things, establishing standards and procedures to protect members and participant funds, risk management capabilities and rule enforcement policies.”
This announcement comes days after the CFTC also granted a DCM license to competing platform LedgerX complimenting its already held DCO license. Just like ErisX, LedgerX did not provide a date for the launch of its physically settled derivatives market platform. Both licenses mark the launch of the highly anticipated physically settled Bitcoin futures contracts that will be settled using the underlying assets, such as Bitcoin in the case of a Bitcoin futures contract or ether for an Ethereum-based derivative contract.
Bakkt, a crypto futures trading platform backed by NYSE parent company is also seeking a similar license from the CFTC, a quest that has proven elusive thus far. In order to gain the license, Bakkt has opted to seek a trust company license from the New York Department of Financial Services which will clear most huddles that the CFTC has placed in front of it. The platform is planning on launching a test platform for its futures contracts this month as it prepares to fully launch the futures platform soon after.
Regarding the ErisX license grant, the CFTC said in a statement that,
“Under the DCO order, Eris will be authorized to provide clearing services for fully-collateralized virtual currency futures. Eris’ indirect parent company, Eris Exchange, LLC, is registered with the CFTC as a designated contract market.”
ErisX launched its spot market earlier this year and so far is supporting the trading of four cryptocurrencies: Bitcoin [BTC], Bitcoin Cash [BCH], Litecoin [LTC] and Ethereum’s Ether [ETH]. According to Laurian Cristea, General Counsel at ErisX, once the futures market becomes available, the exchange will probably integrate both platforms so that users will be able to access both markets from a single interface.
Thomas Chippas, the platform’s CEO touted ErisX’s business model which largely excels at separating the exchange business from the clearing business. He said in a statement that
“ErisX is unique in that for our digital asset market, we have divided the trading and settlement functions using traditional DCM (exchange) and DCO (clearing) models… This reflects the structure that institutional investors expect from other asset classes and will help drive these markets toward greater relevance and accessibility.”
