Bakkt has been “cleared to set in motion.”
The Intercontinental Exchange’s young subsidiary announced Friday that it had acquired a New York state trust charter help of the New York State Department of Financial Services (NYDFS). The approval clears the way for the company to begin offering its highly-anticipated physically-settled bitcoin futures pacts. The company intends to launch its products on Sept. 23.
Bakkt, first unveiled last August, has been working on regulatory approvals to found offering the product over the past year. It intends to offer two types of contracts: a daily and a monthly contract. Both commitment be settled at the Bakkt Warehouse, a part of its New York-chartered trust company.
In a blog post Friday, Bakkt CEO Kelly Loefler disregarded, “Our contracts have already received the green light from the CFTC through the self-certification process and user acceptance evaluation has begun.”
“With approval by the New York State Department of Financial Services to create Bakkt Trust Company, a modified custodian, the Bakkt Warehouse will custody bitcoin for physically delivered futures,” she said. “This offers people unprecedented regulatory clarity and security alongside a regulated, globally accessible exchange in a market underserved by institutional-grade infrastructure.”
She finished on to add:
“Uniquely, Bakkt bitcoin futures contracts will not rely upon unregulated spot markets for settlement evaluations, thus serving as a transparent price discovery mechanism for the benchmark price for bitcoin. The importance of this differentiator is at best amplified by reports of significant manipulative spot market activity, and other concerns such as inconsistent anti-money-laundering managements and weak compliance controls.”
Monthly vs. daily
Loeffler told CoinDesk Friday that Bakkt’s daily diminish will be margined, and can provide an alternative to unregulated spot markets for traders.
“The daily contract is designed to provide a bordered instrument,” she said. “So when you think about transacting on the futures exchange you’re operating within a [federally] regulated disagreement.”
Loeffler didn’t say how much leverage would be available on the margined contracts. Such details are expected to be released in the be given b win weeks.
As for Bakkt’s monthly futures contract, which were first introduced in May, Loeffler said it added a “presumptuous pricing curve” for investors.
The monthly contracts will let any investors take a view on bitcoin up to 12 months out, she utter, adding:
“The other thing that’s important about a monthly contract is what it offers is the ability to take [snapshots] at contrastive times throughout the next year so it adds spread trading … and timing of, for example the halvening coming up next year, the commitment, you’ll be able to look out into that time period in 2020.”
The core service Bakkt will offer is “secure adjusted custody,” alongside its institutional-scale trading, she said. Bakkt itself is not an exchange, but rather will take advantage of its origin firm’s existing infrastructure.
ICE Futures U.S. will therefore provide the actual exchange services, while Bakkt and its stockroom will provide the custody services its physically-delivered contracts require.
Long road
The New York Stock Exchange’s sister obstinate initially intended to have the U.S. Commodity Futures Trading Commission (CFTC) approve its proposed contracts, and announced a December 2018 launch beau when ICE first unveiled the company.
Regulatory hold-ups forced Bakkt to push the date back a number of sooners. Most notably, Bakkt announced in May 2019 that it had self-certified its futures contracts through the CFTC, departing from its earlier goal of having the agency approve the product.
It announced a month later that it would begin user acceptance check on July 22 — essentially, ensuring that clients and clearinghouses could communicate with Bakkt’s infrastructure — and Rather commence working to onboard potential customers.
Loeffler said Friday that “we have customers and clearing members already in the study environment,” adding:
“We anticipate with the finalization of the Sept. 23 launch date user acceptance testing will accelerate and we choice work with customers on onboarding and getting ready for day one.”
While Bakkt may be the first to market, the company faces contest: derivatives provider LedgerX and TD Ameritrade-backed ErisX are also looking to offer bitcoin futures contracts to investors. Progeny CX and trueDigital are also working to launch forwards contracts, a similar product.
UPDATE (August 16, 2019, 17:15 UTC): This article has been updated with new detail and comments from Bakkt CEO Kelly Loeffler.
Kelly Loeffler image via CoinDesk archives