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Bakkt to launch custody and bitcoin futures on September 23

Mon, 19 Aug 2019, 07:23 am UTC

Bakkt, a subsidiary of New York Stock Exchange (NYSE) parent company Intercontinental Exchange (ICE), has been “cleared to launch,” CEO Kelly Loeffler announced Friday in an online post.

As per the announcement, Bakkt has obtained a New York state trust charter from the New York State Department of Financial Services (NYDFS). In its announcement, the DFS said:

“DFS has authorized Bakkt to provide custody services for bitcoin in conjunction with the launch of physically delivered bitcoin futures contracts. Bakkt will serve institutional customers; its bitcoin futures contracts will be listed for trading on Intercontinental Exchange (ICE) Futures US and cleared through ICE Clear US. Both entities are affiliates of Bakkt.”

Loeffler said that the approval from the NYDFS clears to way to create Bakkt Trust Company, a qualified custodian. Bakkt Warehouse, which is part of Bakkt Trust Company, will custody bitcoin for physically delivered futures.

This offers customers unprecedented regulatory clarity and security alongside a regulated, globally accessible exchange in a market underserved by institutional-grade infrastructure,” she added.

Bakkt plans to launch custody and physically-delivered daily and monthly bitcoin futures contracts on September 23, she said. It commenced user acceptance testing last month.

“Our contracts have already received the green light from the CFTC through the self-certification process and user acceptance testing has begun,” Loeffler said.

Importantly, she said that Bakkt bitcoin futures contracts will not rely upon unregulated spot markets for settlement prices and therefore serve as “a transparent price discovery mechanism for the benchmark price for bitcoin.”

“The importance of this differentiator is only amplified by reports of significant manipulative spot market activity, and other concerns such as inconsistent anti-money-laundering policies and weak compliance controls,” she added.

Speaking with CoinDesk, Loeffler said that the daily contract will be margined, but did not disclose how much leverage would be available on margined contracts. The details are expected to be announced in the forthcoming weeks.

With regard to monthly contracts, she said that it has added a “forward pricing curve” for investors. These contracts will enable investors to take a view on bitcoin price up to 12 months out, Loeffler said, adding:

“The other thing that’s important about a monthly contract is what it offers is the ability to take [snapshots] at different times throughout the next year so it adds spread trading … and timing of, for example the halvening coming up next year, the contract, you’ll be able to look out into that time period in 2020.”

Loeffler clarified that Bakkt is not an exchange in itself, but will rather leverage the existing infrastructure of its parent company. The actual services would be provided by ICE Futures U.S., while Bakkt and Bakkt Warehouse will offer custody services for its physically-delivered contracts.

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