What is going on at LedgerX?

LedgerX may have launched trading on the contract market platform designated by the CFTC in June as reported by the cryptocurrency press on July 31. According to details shared exclusively with CoinDesk, the online news service that broke the story around 9:00 a.m. Chicago time, LedgerX launched deliverable bitcoin futures on Wednesday, making it the first exchange ever to offer deliverable cryptocurrency futures contracts in the United States. CoinTelegraph and Bitcoinist carried similar stories later in the day. 

LedgerX tweeted its futures launch and re-tweeted the exciting story from CoinDesk titled “Beating Bakkt, LedgerX Is First to Launch ‘Physical’ Futures in US” on Wednesday morning. The trouble with the story is that according to both the CFTC and LedgerX websites, LedgerX never certified any futures contracts with the CFTC. A futures market is required to certify all of its contracts before trading them. 

Both websites do indicate that LedgerX has certified deliverable options and other swaps contracts with the CFTC which are to be traded on the contract market platform. They seem identical to the contracts that have been traded on LedgerX’s swap execution facility (SEF) since 2017. 

So maybe the news on Wednesday was that LedgerX had launched swaps trading on its contract market platform. They would be the first deliverable swaps contracts traded on a futures market, and that would be news. Listing the contracts on a designated contract market (DCM or futures market) would offer the advantage of being accessible to everyone, not just the class of traders known as “eligible contract participants.”  

But is that what happened? Did the LedgerX DCM launch its swaps trading? If so, then LedgerX certainly broke with tradition and maybe broke a few CFTC regulations by limiting its sole market opening announcement to a tweet and a retweet after the fact. There was no report of any launch on the LedgerX website even by 10:00 pm Chicago time. The tweet announcements  were deleted. And the website does not indicate any trading results for the day, which they are required to post on their website – if they are open. The website doesn’t indicate where the data would be, hinting again that maybe there wasn’t a launch.

Adding to the day’s confusion were some other remarks by LedgerX Co-founder Paul Chou that were reported by both CoinDesk and Bitcoinist. While trying to distinguish LedgerX’s physically delivered contracts from competitors’ cash settled contracts, Chou said some of his customers have nothing to do with the banking system, relying wholly on bitcoin: “ . . .  we are bitcoin-in and bitcoin-out.” The guide to the LedgerX DCM platform, “Omni,” on the website indicates that you do need fiat currency to pay premiums, which are quoted in dollars after all. 

If LedgerX’s futures market license is going to prove valuable in attracting retail customers, the exchange will have to communicate more clearly not just what physical delivery entails but when and what LedgerX is trading. I am sure that the futures industry in the meantime is looking forward to welcoming a new futures exchange.