CFTC Grants Bitcoin Derivatives Startup LedgerX Approval For SEF

Sep 10 2015 | 8:03pm ET

The CFTC has given Bitcoin derivatives startup LedgerX temporary registration as a swap execution facility (SEF).

The regulator issued an order of temporary approval for the company’s application to list and clear fully collateralized, physically settled options on bitcoin for the institutional market. As a next step, the Commission will undertake a substantive review of LedgerX’s application for full registration, according to a statement.

LedgerX applied for registration with the CFTC as a SEF and derivatives clearing organization DCO on September 29, 2014, and the CFTC solicited public comment on the application near the end of the year.

The approval, however, does not immediately mean LedgerX will list any product for trading. Prior to any listing, the company must still comply with a number of additional requirements.

“This is a first step, and is positive progress, but it is just one milestone toward our ultimate goal," noted Paul Chou, founder of LedgerX, in a statement to FINalternatives. "Our mission is still to obtain a derivatives clearing organization license (DCO) to operate a federally regulated bitcoin derivatives exchange and clearing house. At this time, we do not intend to launch with only a SEF license.”

Institutional investors such as hedge funds, family offices and money managers have lacked the ability to use forward option contracts to leverage and hedge exposure to the digital currency.  

Founded in 2014 by Chou, a former Goldman Sachs executive, LedgerX has enjoyed some serious backing, including none less than Jim Newsome, former chairman of the CFTC. In addition, Tom Lewis, former CEO of Ameritrade sits on the board, and investors in the firm include Google Ventures and Lightspeed Venture Partners.

Editor's note: Amended on 11 Sep. to include the quote from Chou. 

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