Seed CX’s Swap Execution Facility begins tests for physically settled bitcoin (BTC) swaps

Seed SEF, the swaps trading platform subsidiary of Seed CX, today announced that user acceptance testing of its physically-settled bitcoin derivatives has begun and will carry on through early August.

Seed SEF has opened its user acceptance testing (UAT) environment to customers to begin trading on Seed SEF’s matching platform.

“We’re very excited to have begun user testing of our physically-settled bitcoin derivative product. 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.”
– Brian Liston, Seed CX co-founder, and President

Seed SEF has been licensed as a Swap Execution Facility by the Commodity Futures Trading Commission since 2016. The platform hopes to permit institutions and sophisticated customers to trade derivatives overlaying digital assets. Seed SEF has been working closely with regulators to ensure that its planned products meet all regulatory requirements.

In most other traditional assets, physically-settled derivative contracts are margined to provide for capital efficiency, however, all digital asset derivatives being traded in the US today are either financially-settled, or fully collateralized.

Seed SEF

The bitcoin swap to be listed by Seed SEF will be both margined and physically-settled, which will, therefore, allow market participants to enter into a leveraged position to buy or sell bitcoin for physical delivery at a later date. Seed SEF will utilize a Value-at-Risk based margin methodology to calibrate initial margin requirements for the product.

Seed SEF plans to incrementally list a combination of weekly and monthly contracts such that at any one point in time there will always be four upcoming weekly contracts, three upcoming serial monthly contracts, and two upcoming quarterly monthly contracts available for trading. Weekly contracts will expire on the Friday of each week. Monthly contracts, including the quarterly monthly contracts, will expire on the third Friday of the month to which the contract relates.

Delivery of Seed SEF’s derivative products will take place through its affiliate, Zero Hash LLC. Zero Hash serves as the calculation agent and delivery facility for a number of trading venues, including Seed SEF.

Seed CX recently announced that Zero Hash has been granted a virtual currency license ‘BitLicense’ by the New York Department of Financial Services.