Why Has LedgerX’ Physical Bitcoin Futures Platform Not Launched?
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August 02, 2019
LedgerX has not yet launched the first physically settled Bitcoin Futures trading platform after the 180-day probation period with CFTC stating that lack of a decision does not constitute an approval.
On August 1, 2019, Ryan Gorman, LedgerX press representative, said that he will no longer represent the company effective immediately. He cited ‘concerns‘about the events of the past 24 hours. In a Thursday afternoon twitter tirade, the CEO of LedgerX, Paul Chou, stated that the CFTC asked the company to censor all its tweets.
He threatened to sue the regulator for “anti-competitive behavior, breach of duty, and going against regulations.” The case would be based on the 180-day requirement stipulated by the regulator. On August 1, LedgerX admitted that it has not launched Bitcoin futures as previously claimed. The announcement came after the U.S. Commodity Futures Trading Commission (CFTC) said it had not approved the exchange to do that.
In the CFTC’s own June 25 press release announcing the designated contract market (DCM) approval, the regulator said:
“LedgerX has requested that the CFTC amend its order of registration as a DCO, which limits LedgerX to clearing swaps, to allow it to clear futures listed on its DCM”
According to CFTC regulations (Title 17 part 39.3), the agency has up to 180 days to approve or deny a derivatives clearing organization (DCO) license application. Paul Chou said that the CFTC wanted them to clear swaps as well as futures too and they were waiting for that amendment.
The company earlier wanted to launch the product on August 1st. That would make LedgerX the first venue to offer physically-settled Bitcoin futures in the United States. The futures are contracts that pay out in the underlying crypto instead of cash. Paul Chou explained:
“Not only are they delivered physically in the sense that our customers can get Bitcoin after the futures expires, but also they can deposit Bitcoin to trade in the first place.”
Not Yet Approved
As we published earlier, LedgerX came out with a special announcement, out of nowhere, saying that they have launched the first physically-settled Bitcoin Futures trading platform. Juthica Chou seemed to suggest that since the 180-day period had elapsed without any CFTC objection, the company thought that it was legal for them to launch. She does not know why their case has not yet been approved. She explained:
“We filed on Nov. 8 and we have email correspondences confirming there were no additional items that they needed for the amendment.”
However, Michael Short, CFTC chief communications officer, said in an email sent on August 1st that:
“LedgerX has not yet been approved by the Commission. Every new or amended DCO application needs to be affirmatively approved by the Commission. The absence of a decision does not constitute approval, and entity self-certification is not an option.”
Looking at LedgerX’s data page, it is clear that only options and swaps trades took place on July 31, but no futures. When contacted later, Juthica said that the company was not trading futures contracts. She insisted that the earlier conversation only referred to Omni, LedgerX’s retail platform. She confirmed that it is actively serving swaps and options products to traders currently. Juthica added:
“We’re still operating; we’re putting the product in front of retail.”
According to section 6(a) of the Act:
“The Commission may stay the running of the 180-day review period if an application is materially incomplete.”
Nonetheless, there is no definite indication of whether CFTC took that action. According to a senior official, the LedgerX’s DCO application seems to be in the final stages of the approval process. Paul Chou elaborated on the difference between future and swaps products. He said:
“Basically, it’s just a total technicality that a swap and a future are different things and … it’s actually a little different. The difference between futures and swaps is ridiculously small, it’s the same product.”