Bakkt has announced the exact date of launching its bitcoin futures contract project. It has received an approval from the New York State Department of Financial Services (NYDFS) and a New York state trust charter. Reportedly, the company is going to launch the project on September 23.
Bakkt has been seeking approvals since August 2018, when it actually made its presence in the bitcoin market. Finally, Bakkt Trust Company appeared, and now the platform is planning to focus on two types of contracts: daily and monthly. Both will be housed at the trust company’s division – the Bakkt Warehouse. The new contracts will be backed by a guaranty fund, which is receiving a $35 million contribution.
Kelly Loefler, Bakkt CEO wrote in her blog post that the contracts got a CFTC approval through self-certification, and user-acceptance testing was underway. She also noted that Bakkt Trust Company was a reliable custodian, and the Bakkt Warehouse would hold bitcoin for physically-settled futures. Finally, she noted new benefits for customers, as the exchange would guarantee maximal transparency and security, and it would be available worldwide.
She confirmed that Bakkt bitcoin futures would use a unique and clear price setting mechanism. They were not going to rely on unregulated spot markets that are sensitive to manipulative activities. The approach would provide an effective benchmark price-setting mechanism for the cryptocurrency. This sounds encouraging given the incoming news about manipulative spot market operations, poor compliance control, improper anti-corruption practices, etc.
Monthly and Daily Contracts
According to Kelly Loeffler, daily contracts will use marginal tools and will make a safe alternative to highly speculative spot markets. She points out the advantage of the new mechanism, as traders enjoy the long-sought-for security of operating a state-regulated exchange. However, so far little is known about the planned amount of leverage on the margined contracts.
Monthly futures, Loeffler said, would allow investors to foresee bitcoin price dynamics for about a year ahead. They enable customers to track the market’s reaction to events, make a kind of snapshots several times a year. Thus they build a relatively clear picture of what is going to happen and when.
Bakkt is a subsidiary to the Intercontinental Exchange, and it is not actually an exchange. It is going to use the parent company’s infrastructure to provide exchange and custody services along with institutional-scale trading.
Initially, the launch was planned for December 2018. It was then that ICE first presented Bakkt. However, regulatory hold-ups changed the company’s plans and forced it to postpone it until January 2019. After another hold-up, the launch was postponed indefinitely. Eventually, after getting the NYDFS license in May 2019, Bakkt self-certified its contracts through the CFTC instead of getting approval from the agency.
A month later the company announced its intention to test user acceptance and check the user-friendliness of the Bakkt’s infrastructure. They were getting ready to attract customers and clearinghouses. That was going to be a major step toward building a clientele. According to Kelly Loeffler, by the time lots of customers and clearinghouses had joined the test. She expected that the confirmation of the September 23 launch date would boost the testing process.
Although Bakkt is actually pioneering in the segment, it already has competitors: ErisX and LedgerX have received approval from CFTC to launch their own bitcoin futures contracts. TrueDigital and Seed CX are about to launch forwards contracts, which are similar to futures.