In direct competition to ICE‘s Bakkt platform, cryptocurrency exchange ErisX has launched its physically-settled Bitcoin futures contracts. In an official announcement on Monday, December 17, ErisX said that it will make its futures contracts available in the U.S. as of now.
The product dubbed “Futures Digital Currency Products” will start trading today onwards from 8:00 a.m. Central Time (14:00 UTC). As per CoinDesk, ErisX’s Bitcoin futures will trade alongside its existing cryptocurrency spot exchange. As per the information on its product page, ErisX Bitcoin futures hold a contract size of 0.1 BTC i.e. $670. Furthermore, the customers get an option to trade either daily or monthly contracts similar to the Bakkt.
After Bakkt, ErisX becomes the second platform to offer physically-settled Bitcoin futures contracts. ICE’s Bakkt platform announced a similar product offering just a few months back in September 2019. Physically-settled contracts mean that the delivery shall be taken in actual Bitcoin tokens, during expiry. On the other hand, cash-settled contracts don’t make it mandatory to hold BTC tokens. The CME and the CBOE group were the first ones to offer cash-settled Bitcoin futures in December 2017.
Well, it looks a right time to launch Bitcoin futures contracts as the open interest in the Bakkt Bitcoin futures contracts hit a record high last week. Earlier this year, ErisX executive vice president of trading and education Steve Quirk, said:
“Our retail clients are seeking to access and trade digital currency products in the same way they do with traditional capital markets — through a legitimate, regulated and transparent exchange.”
Analyzing the Challenges Ahead
While the ErisX’s futures market is opening today, investors can’t participate through brokerages or futures commission merchants until next year. In its press release, the company wrote:
“We know that growth in open interest will take time and there are clear challenges ahead. Introducing an intermediary market is a multi-step process, not an event, and our experience with such launches has taught us to build for longevity.”
Wedbush executive vice president Bob Fitzsimmons has confirmed that his company Wedbush Securities will participate in the ErisX marketplace. He said:
“ErisX has taken many steps to build out their intermediary-friendly model for digital assets including the consideration of how many FCMs manage back-office processes through FIS. We look forward to playing a role in ErisX’s marketplace and enhancing the digital asset trading and investing experience.”
Similarly, Chris Larkin, Senior Vice President, E*Trade, said:
“The launch of ErisX’s fully regulated futures market is a significant development for the digital asset industry. The more accessible contract size and transparent order book provides first time market participants exposure to digital assets through a familiar mechanism.”
ErisX is currently offering its spot trading services in 44 states across the U.S. This year, the company has pushed for aggressive expansion by raising funds, getting several regulatory licenses, and expanding its team. Thomas Chippas, CEO of ErisX, said that his company “also developed modern infrastructure including a brand new matching engine and futures clearing system from scratch”.
ErisX also received the Derivative Clearing Organization (DCO) license from the CFTC this summer. Thus, it will end the year with its Bitcoin futures offering.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
