Bakkt Will Begin Testing Its Bitcoin Futures Products In July
Bakkt, a bitcoin futures exchange fronted by NYSE operator Intercontinental Exchange (ICE), has announced that the launch of its physically-settled BTC futures products is moving into the testing phase.
Bakkt chief executive Kelly Loeffler noted in a blog post published on Monday that the firm would begin testing its crypto futures contracts by July this year.
Loeffler noted that Bakkt had closely engaged and worked with derivatives market regulator- the U.S. Commodity Futures Trading Commission (CFTC) – in its efforts to offer the products within a regulated environment.
Notably, though, Bakkt has not announced any specific launch date. The Bakkt CEO did not also say whether the CFTC has approved the firm’s plan to self-custody bitcoin holdings as well as use ICE’s warehouse ICE Clear U.S. to clear the products.
But what will happen is that Bakkt, through its parent company ICE, is expected to self-certify the bitcoin futures products it is offering. The CFTC will then proceed to review and determine whether or not the firm’s proposals contravene any regulations.
If the regulatory agency finds nothing amiss within a stipulated 10-day deadline, then Bakkt will proceed to offer its products.
Taking this route means that Bakkt isn’t pushing for CFTC’s approval, which is the same approach that CME and Cboe adopted in 2017- self-certifying their products.
Nevertheless, the CME and Cboe products differ from Bakkt’s in that the former are cash-settled while the other is expected to deliver actual bitcoins upon the expiry of a contract.
On Monday, ICE published documents related to its products- a daily and a monthly contract- in which it detailed its listing and self-certification.
Loeffler said that the firm intends to work with its clients “over the next several weeks” as preparation for a period of user acceptance testing (UAT). The testing is expected to begin in July.
“We expect to use UAT to ensure that customers have time to onboard and can test the trading and custody model we’ve built to their satisfaction.”
Loeffler also revealed some details regarding new products lined up at Bakkt, which adds to the new futures contracts that see the platform prepare for both same-day and monthly futures contracts. Earlier on, the platform had announced it would offer one-day futures contracts only.
On top of this, Bakkt also plans to set aside $35 million as part of a clearinghouse risk waterfall. The funds will help the exchange to align its interests and support integrity and market safety.
The platform also has plans to get regulatory approval to run an own qualified custodian and has reportedly decided to pursue a trust company license from the New York Department of Financial Services (NYDFS).
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.