LedgerX, the US provider of cryptocurrency derivatives, has announced their plans to dive into the market for physically-delivered Bitcoin futures and become the first US company to offer such a service.
On Monday, the company applied for a designated contract market (DCM) license that would allow it to offer physically-settled Bitcoin futures products to its clients. Such trading firms as Bakkt, ErisX, Seed CX, and CoinFLEX have announced the same products. However, LedgerX is likely to have more chances for approval.
As LedgerX co-founder Juthica Chou said, LedgerX has an advantage over its rivals as its been trading similar products longer than anyone else:
“We’ve been doing LedgerX since 2014 … tons of people have announced plans to do this but ultimately we are the only ones that have done it.”
Unlike the existing cash-settled contracts provided by CBOE and CME since December 2017, LedgerX customers would receive the actual Bitcoin underlying a contract after it expires, rather than the U.S. dollar equivalent.
According to Juthica Chou, the initiative may target not only institutional but also retail investors. She said:
“We’ll be able to service customers of any size, we won’t be restricted to [institutional clients].”
“I think at this current time we don’t see the demand growing among really large institutions and banks. We are still a $85 billion market cap for bitcoin — really just the size of a large stock. Right now we see the opportunity towards the other end of the spectrum.”
When approved, LedgerX will offer Bitcoin, Bitcoin options and Bitcoin futures to retail customers through its new platform Omni. Omni will support trading of futures, swaps, and options for retail users and serve as a provider for both custody and trading services using the LedgerX existing institutional liquidity and the infrastructure.
LedgerX Swift Victory
LedgerX first began providing physically-settled derivatives products in October 2017. Within the first week, the company traded $1 million. As Chou stated, the platform proved stable, and they filed for a license with the CFTC.
In November 2018, LedgerX started a dialogue with the CFTC and received two licenses, the first one allows acting as a Swap Execution Facility (SEF), which is the company’s exchange platform, the second one lets the company operate as a Derivatives Clearing Organization (DCO), which is the clearinghouse.
Juthica Chou stated that DCM application is just an additional license, and LedgerX already has the right to offer futures services. She explained:
“We’re custodying [bitcoin] in the same way that we currently do, we’ve obviously been live and operational for more than a year and a half, and we have a license from the CFTC, the DCO license, that allows us to custody bitcoin.”
Further, Chou said:
“For us, this is a philosophically important move because bitcoin is available to everyone and we… really wanted to make our derivatives products available to all investors as well.”
Currently, LedgerX has about 200 different firms as customers. With offering physically delivered Bitcoin futures, this number will definitely multiply.