Bakkt to test bitcoin futures trading in July, contributes $35mn to waterfall

In collaboration with ICE Futures US and ICE Clear US, Bakkt announced the launch of its bitcoin futures contracts, which will be listed on a federally regulated futures exchange in the coming months.

“In conjunction with our exchange and clearing partners at ICE, we’ll be working with our customers over the next several weeks to prepare for user acceptance testing (UAT) for futures and custody, which we expect to start in July. We’ll provide more details in upcoming posts, but 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,” the digital asset firm wrote in a Medium post.

The new bitcoin futures contracts have been shaped by conversations with stakeholders, and have the following trading, security and risk management features:

  • Two futures contracts will be listed: a daily settlement bitcoin future, which will enable customers to transact in a same-day market; and a monthly bitcoin futures contract will enable trading in the front month and across the forward pricing curve.
  • Price formation in these benchmark contracts will be supported by proven tools to detect abusive or disruptive trading practices, including wash trades. That means that the settlement prices on ICE Futures US will be based on prices discovered in our physical delivery contracts without relying on unregulated cash markets.
  • The futures contracts will be margined by ICE Clear US, including the collection of initial margin collateral and variation margin to manage risk. This approach is consistent with capital-efficient risk management practices in global futures markets, ranging from oil and gold to interest rates and equity index futures.
  • Bakkt will contribute $35 million into the clearinghouse risk waterfall. This puts our own “skin in the game” and aligns our interests for market integrity and safety with market participants.
  • For physical delivery and secure storage of bitcoin, an integrated custody service will be fulfilled by Bakkt’s qualified custodian, subject to regulatory approval. Safekeeping will be supported by insurance, cybersecurity, and comprehensive compliance, including an anti-money-laundering program and blockchain analytics.

Bakkt is also working with the New York State Department of Financial Services to become a trust company and operate as a qualified custodian for digital assets, alongside its CFTC-regulated futures products: “The landscape won’t change overnight, but the intersection of technology and finance requires cooperation between business and policy makers to ensure the US maintains a critical voice in how this space evolves,” the firm wrote.

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