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CFTC approves LedgerX for options on Bitcoin

First Published 11th July 2017

CFTC approves LedgerX as Swap Execution Facility, paving the way for options on Bitcoin.

The CFTC announced last week that it has approved LedgerX as a Swap Execution Facility (SEF). This means that LedgerX, which describes itself as an "institutional trading and clearing platform" for "options on bitcoin" (BTC), will be regulated by the CFTC. That imprimatur should help in a market whose development has been marred by scandals, many of which related to the exchanges on which Bitcoin traded.

The CFTC's approval of LedgerX is perhaps not a surprise. The firm's founder and CEO, Paul Chou, an alumnus of Goldman Sachs and tech entrepreneur, sits on the CFTC's Technology Advisory Committee, and Ananda Radhakrishnan, an independent director at LedgerX, was formerly the director of the CFTC's Division of Clearing and Intermediary Risk.

Options on Bitcoin have traded in the past, with retail-oriented exchange NADEX, also regulated by the CFTC, having offered binaries on the cryptocurrency up until last December. However, LedgerX is the first institutional platform to pursue trading in BTC options. Before LedgerX begins trading, it will have to find a way to clear trades. The firm has already applied to the CFTC to be a Derivatives Clearing Organization (DCO) in order to both trade and clear BTC options. The DCO application is currently awaiting approval, though there is no indication of when a decision will be made.