The U.
S. Commodity Futures Trading Commission (CFTC) has cleared the way for crypto derivatives provider ErisX to offer futures contracts with a new license approval Monday.
ErisX announced, which is backed by U.
S. brokerage TD Ameritrade, that the CFTC granted it a derivatives clearing organization (DCO) license, acting as a secondary approval on top of an existing designated contract market (DCM) license that the exchange already held. The approvals mean the company can now launch crypto futures products under the auspices of the U.
S. regulator.
While no firm timeline was provided, ErisX’s announcement said it would launch its futures contracts – which would be physically-settled, meaning customers receive real bitcoin and not the cash equivalent – “later this year.”
In a statement, ErisX CEO Thomas Chippas said that the company is “unique” because it “divided the trading and settlement functions using traditional DCM (exchange) and DCO (clearing) models.”
He added:
“This reflects the structure that institutional investors expect from other asset classes and will help drive these markets toward greater relevance and accessibility.”
“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,” a CFTC press release read.
ErisX’s approval comes a week after competitor LedgerX received its own DCM license. Like ErisX, LedgerX has yet to announce a firm timeline for the launch of its bitcoin futures contracts.
Bakkt, the subsidiary of NYSE parent firm ICE, is also planning to launch its own physically-settled bitcoin futures, and is currently waiting on a trust company license from the New York Department of Financial Services.
Seed CX, another crypto derivatives provider in the U.
S., hopes to offer forwards contracts in the coming months as well.
No-action relief
On top of its DCO approval, ErisX received no-action relief from the CFTC for certain aspects of its offering.
Companies apply for no-action relief when they believe their product can fit the spirit of the law, but not necessarily the letter. It is up to regulators to determine whether the applicants can fulfill that promise.
Specifically, the CFTC Division of Clearing and Risk granted ErisX relief from aspects of Part 39 of the Code of Federal Regulations Title 17.
The letter details how ErisX’s requirement that customers collateralize all transactions grants it relief from various provisions that seek to verify the clearinghouse can cover any losses.
TD Ameritrade image via Shutterstock
