US regulators aren’t yet comfortable with bitcoin ETFs (although a quad-levered S&P ETF is just fine for mom and pop), but apparently options and swaps are another story.
This week, the CFTC took a bold step forward in terms of granting institutional investors access to the bitcoin market, approving the creation of the first SEF or Swap Execution Facility. Previously, traders who wished to place bets in bitcoin derivatives markets were forced to operate in markets that were strictly OTC. But now the agency has issued a registration order to LedgerX, granting it status with the CFTC as a Swap Execution Facility, in the process approving bitcoin options trading.
SEFs are platforms for swap trading that were created under Dodd-Frank to bring tighter regulatory scrutiny to derivatives markets. By authorizing the first SEF for bitcoin options, the CFTC is effectively clearing the way for institutional traders like hedge funds and CTAs to participate in those markets.
“LedgerX is an institutional trading and clearing platform which has been patiently waiting for full regulatory approval from the CFTC to trade and clear options on bitcoin.
It is now the first federally regulated bitcoin options exchange and clearing house which will list and clear fully-collateralized, physically-settled bitcoin options for the institutional market.
On December 16, 2016, Ledger Holdings and Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX Options Exchange, jointly announced that MIH had completed an investment in Ledger Holdings. Early investors in Ledger Holdings include Google Ventures and Lightspeed Venture Partners.”
Back in May, LedgerX closed an $11.4 million series B financing round led by Miami International Holdings Inc. (MIH) and Huiyin Blockchain Venture Investments. In return, MIH received 10-year, exclusive global rights to license equity or fixed income products related to digital currencies developed by LedgerX and to develop its own equity or fixed income derivatives based on such LedgerX products to be listed on MIAX Options and MIAX PEARL, MIH’s second options exchange.
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