The U.S. Commodity Futures Trading Commission (CFTC) has granted LedgerX LLC registration as a swap execution facility (SEF), making it the first federally regulated SEF allowed to offer clearing services and a trading facility for options based on digital currency for the institutional market.
LedgerX plans to list and clear fully collateralized, physically settled options on bitcoin and other cryptocurrencies. SEFs operate under the CFTC’s regulatory oversight for the trading of swaps.
Following a review of the LedgerX application, the CFTC determined that LedgerX complied with the necessary regulations.
LedgerX also must not list an intended-to-be-cleared swap until it has a clearing agreement with a registered derivative clearing organization, according to the CFTC. LedgerX also must not list a swap not intended to be cleared until it submits revisions of its rulebook and other pertinent materials to provide for the execution of uncleared swaps.
There now are 25 SEFs registered with the CFTC.
LedgerX received an investment from Miami International Holdings Inc. (MIH) in December. MIH invested in LedgerX’s parent company, Ledger Holdings, and received a 10-year, exclusive global right 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.
The CFTC previously appointed Paul L. Chou, CEO and founder of LedgerX, as a bitcoin trading expert to its technical advisory committee. The committee advises the CFTC on the impact of technology innovations for the securities market and financial services, along with the regulatory and legislative response to the growing use of technology in the markets. Committee members include representatives of financial intermediaries, traders, futures exchanges, self-regulatory organizations and market participants.
The CFTC officially recognized bitcoin as a commodity in September of 2015 when it took an enforcement action against a bitcoin operator for being unlicensed. That action marked the most significant bitcoin regulatory move in the U.S., along with the New York State BitLicense, also enacted in 2015.
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