Kelly Loeffler, CEO of Bakkt, the Intercontinental Exchange backed bitcoin futures and custody company, first announced back in August 2018, today provided an update on the launch of bitcoin futures contracts developed by Bakkt in collaboration with ICE Futures U.S. and ICE Clear US. Loeffler announced that with its exchange and clearing partners at ICE, Bakkt will be working with customers over the next several weeks to prepare for user acceptance testing (UAT) for futures and custody, which is expected to go live 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. We’ve worked closely with the CFTC to develop contracts that both meet our customers’ needs for trading, transparency, and market certainty, and are also compliant with Federal regulations. Customers active in crypto markets — and many still waiting to get in — have had a voice in shaping the design of the initial product offering. As detailed in the ICE Futures U.S. filing with the CFTC today, bitcoin futures will be listed on a federally regulated futures exchange in the coming months.”
The new Bakkt bitcoin futures contracts will offer unique trading, security and risk management features including:
- Two futures contracts will be listed: 1) A daily settlement bitcoin future, which will enable customers to transact in a same-day market. And 2) 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 U.S. will be based on prices discovered in Bakkt’s 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 Bakkt’s own “skin in the game” and aligns 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.
As announced last week, the Bakkt team is also now 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. This would enable custody for delivery of bitcoin futures.