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Seed SEF, a subsidiary of cryptocurrency exchange Seed CX, has started user acceptance testing (UAT) of its physically-settled bitcoin derivatives.
Seed SEF was licensed as Swap Execution Facility (SEF) by the Commodity Futures Trading Commission in 2016. It plans to offer a market for CFTC-regulated digital asset derivatives.
In a press release dated August 13, Seed SEF said that it has opened its UAT environment to customers to begin trading on its matching platform.
In addition to being physically-settled, the bitcoin swap to be listed by Seed SEF will also be margined, allowing market participants to enter into a leveraged position to buy or sell bitcoin for physical delivery at a later date. The company will use a Value-at-Risk based margin methodology to calibrate initial margin requirements for the product.
“We’re very excited to have begun user testing of our physically-settled Bitcoin derivative product,” said Brian Liston, Seed CX co-founder and President. “We’re at the final step. With the successful completion of testing and regulatory review, we will be able to launch a much needed margined, physically-settled digital asset derivative to U.S. customers.”
Seed SEF intends to incrementally list a combination of weekly and monthly contracts so that there will be four upcoming weekly contracts at any point in time – four upcoming weekly contracts, three upcoming serial monthly contracts, and two upcoming quarterly monthly contracts. Weekly contracts will expire on the Friday of each week, while monthly contracts, including the quarterly monthly contracts, will expire on the third Friday of the month to which the contract relates.
The delivery of Seed SEF’s derivative products will take place through its affiliate, Zero Hash, which was recently granted a virtual currency license by the New York Department of Financial Services.
Meanwhile, Bakkt, a subsidiary of New York Stock Exchange’s (NYSE) parent company Intercontinental Exchange (ICE), also started UAT for bitcoin daily and monthly future contracts last month.
