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Launch Timeline for Bakkt’s Bitcoin Futures to Be Clarified Early 2019: ICE

The operator of the New York Stock Exchange posted an update for the launch of Bakkt’s physically settled daily Bitcoin futures contract.

 

The Intercontinental Exchange (ICE) announced an update on the launch of the Bakkt Bitcoin (USD) Daily Futures Contract in an official notice Dec. 31.

The document from ICE — the operator of the New York Stock Exchange (NYSE) and creator of digital assets platform Bakkt — states that “[f]ollowing consultation with the Commodity Futures Trading Commission [CFTC], ICE Futures U.S., Inc. expects to provide an updated launch timeline in early 2019 for the trading, clearing and warehousing” of Bakkt’s Bitcoin (BTC) futures contract.

The document reiterated that previously the firm had been targeting Jan. 24, 2019 as a launch date, but that the date “will be amended pursuant to the CFTC’s process and timeline.”

The statement also outlines the particular nature of Bakkt’s futures contracts, stating:

“The Bakkt Bitcoin (USD) Daily Futures Contract is a physically-settled daily futures contract for bitcoin held in Bakkt Warehouse, and will be cleared by ICE Clear US, Inc. Each futures contract calls for delivery of one bitcoin held in Bakkt Warehouse, and will trade in U.S. dollar terms.”

As Cointelegraph also reported today, Bakkt has completed its first funding round, raising $182.5 million from 12 partners and investors.

ICE initially announced the intention to create an “open and regulated, global ecosystem for digital assets” powered by the Microsoft cloud infrastructure this past August.

The founder of Galaxy Digital — a crypto investment firm that invested in Bakkt — cited Bakkt’s pending launch as one of the industry developments that could help turn around the downward trend in crypto markets this year.

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Huobi to Launch Company’s First Exchange Dedicated to EOS in Q1 2019

Huobi plans to launch the company’s first crypto exchange — dedicated to EOS — in the first quarter of 2019.

Huobi Group plans to launch the company’s first cryptocurrency exchange — which will be dedicated to EOS — in the first quarter of 2019, according to a press release sent to Cointelegraph on Dec. 29.

The exchange will be reportedly launched by Huobi Pool, the group’s cryptocurrency mining arm. Cao Fei, the CEO of Huobi Pool, described the launch of the EOS exchange as “the next logical step in our support” as an EOS Block Producer (BP).

The release states that the exchange will allow clients to trade in the altcoin EOS against several other cryptocurrencies.

Huobi is currently the third-ranked crypto exchange based on the volume on CoinMarketCap, with around $774 million in 24 hour volume at press time.

As Cointelegraph reported, the exchange recently also announced support for EOS on its derivative market. The daily traded volume on Huobi’s cryptocurrency derivative market also reportedly recently broke $1 billion.

The company’s derivative market had been launched only about a month before, at the end of November. The advantage that the company stressed when presenting the market at the Cryptofrontiers conference is that it allows customers to take both short and long positions.

EOS has been repeatedly criticized for alleged centralization. Recently, Starteos, one of EOS’ BP’s, appeared to publically offer its token holders financial rewards in return for their votes. There have also been investigations in the EOS ecosystem after Huobi was accused of running a corruption scheme.

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Third-Largest Crypto Exchange Huobi’s Derivative Market Now Includes EOS

The Huobi Derivative Market has added EOS contracts, which allows traders to take both long and short positions on the cryptocurrency.

Cryptocurrency exchange Huobi’s derivative market now supports altcoin EOS, according to an official press release shared with Cointelegraph on Dec. 28.

Huobi is currently the third-ranked cryptocurrency exchange by adjusted volume on CoinMarketCap, with around $505 million in 24 hour volume at press time.

Traders will reportedly be able to take both long and short positions on EOS. The decision to create the derivative contract is part of the exchange’s “ongoing efforts to address customer demand.”

According to the press release, the contract will support price limit, order limit and position limit orders at up to 20x leverage. The fees for trading the EOS derivative on the Huobi Derivative Market will be 0.02 percent for makers and 0.03 percent for takers to both open and close positions.

At press time, EOS is trading at around $2.35, down a little more than 7 percent on the day.

Huobi announced the launch of its derivative market at the Cryptofrontiers conference in New York in November. Contract trading allows users to purchase and sell digital currencies at predetermined prices at specified times in the future, giving investors the opportunity to gain from both upward and downward market trends.

As Cointelegraph recently reported, OKEx, a major Malta-based cryptocurrency exchange, has recently launched a new derivative. This new product — called Perpetual Swap — is a virtual derivative that lets users speculate on the future value of BTC/USD. The perpetual swaps reportedly have no expiration, meaning that the positions can be held indefinitely.

Nasdaq, the world’s second-largest stock exchange, plans to release its own Bitcoin (BTC) derivate, Bitcoin futures, in the first half of 2019.

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Markets Tech Firm to Launch Crypto Derivatives Exchange

Interactive financial markets technology platform LevelTradingField is launching a cryptocurrency derivatives exchange using the ethereum blockchain.

Dubbed CADE, the exchange is set to go live this September. It will list ERC-20 tokens which track bitcoin, ether, litecoin, bitcoin cash, ripple and monero, with more to be considered on a rolling basis, according to a press release published Friday.

These tokens will allow traders to reap the economic benefits of investment in crypto without actually owning any of the digital goods.

All derivative tokens on CADE are to be priced in LUSD, a stablecoin pegged to the U.S. dollar and guaranteed for by the company.

The press release notes that this type exchange could be used in a variety of beneficial ways, not just for cryptocurrency traders, also but miners and long-term investors.

On the other hand, the release also notes that CADE will only accept participants who have successfully passed through a “robust compliance framework” in order to ensure that know-your-customer and anti-money-laundering standards are upheld.

Last year the company launched a Bitcoin Market Predictor attracting participants to bet on the future price movements of bitcoin in a game of skill akin to fantasy sports betting. More recently, LevelTradingField also announced a new partnership with global connectivity provider, NetXpress, to feature a cryptocurrency feed for users consolidating data from major cryptocurrency exchanges.

Exchange display image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Axoni, Clearmatics Claim Milestone for Blockchain Interoperability

Two of the most prominent startups in enterprise blockchain are teaming up to tackle the hard, but now seemingly inescapable problem of interoperability.

At Consensus 2018 this week, Clearmatics and Axoni demonstrated how a financial derivative can be issued via a smart contract, trigger a payment and then instigate a cross-chain atomic transfer of value between two distinct networks. This marked the first time a derivatives contract has been originated on one enterprise blockchain and settled on another.

The milestone is important because interoperability is now emerging as a key design goal of distributed ledger technology (DLT).

While the financial world may be moving from a state of many ledgers to fewer ones, blockchain architects have come to realize that trades, deals and transactions will probably never be originated, processed and settled by a single, monolithic system.

Robert Sams, the CEO of Clearmatics, told CoinDesk:

“Facilitating end-to-end processing from point of trade to settlement, we need to make the assumption that that process is going travel through multiple systems, rather than a single monolithic settlement system, distributed or otherwise.”

The collaboration is significant also because of the clout of the players involved.

Axoni, based in New York, is working with a wide range of leading financial institutions and infrastructure providers to move trillions of notional value in U.S. dollars onto blockchain tech across a variety of asset classes.

Meanwhile, its partner in the demo, Clearmatics of London, is working with a consortium of banks and financial institutions to create digital fiat that is fully collateralized by cash at the corresponding central bank and transferable on a distributed ledger.

Axoni has also been doing a lot of work in the derivatives space and other areas of post-trade processes, while Clearmatics is focused on the settlement side of things, so the pairing was an obvious fit (both are building technology based on ethereum-derived architecture).

“If we can collaborate appropriately and facilitate linkage between those networks, what you end up with is a highly automated, highly transparent process all the way from trade agreement through to settlement finality,” said Greg Schvey, the CEO of Axoni.

Lessons from crypto

Stepping back, it’s fair to say blockchain interoperability is at the R&D stage.

To make sense of the problem involves a lot of requirements based on use cases and the domain applications, which all have to be considered together. Sams emphasized that the interoperability demo was just a proof of concept – but an important one, because it drives the spirit of open source collaboration.

“Interoperability needs to be tackled in a open and collaborative fashion and built around open standards and open source implementations,” he said, adding:

“There will probably be multiple types of interoperability solutions – not many, but more than one.”

The same spirit extends to the public blockchain community, where a lot of cutting-edge work is being done on the very technical aspects of the topic.

“There’s a lot of overlap between cross-chain atomic swaps in the cryptocurrency space and the stuff that we are doing,” said Sams. “Even though the domain application is entirely different, the underlying technological primitives are very similar.”

The contract in question was modeled using Axoni’s domain-specific language, AxLang, and then settlement finality of the resulting cash payments was achieved across different permissioned, ethereum-compatible ledgers.

Clearmatics’ contribution to the demo was Ion, an open source interoperability protocol, designed to perform atomic cross-chain transactions.

Lingua franca

The AxLang smart programing language used here was developed by Axoni to make working with smart contracts in an enterprise setting a sure thing, so to speak.

Axlang is based on Scala and enables formal verification of smart contracts, a rigorous mathematical method used to prove the correctness of computer programs. It can also compile to both the Java and the ethereum virtual machines.

However, developers are often asked, why another programing language?

Schvey said that doing lots of work with large-scale application design on blockchains revealed certain requirements not being met by Solidity, the first step into programming smart contracts among the ethereum community.

In particular, Solidity lacks formal verification, which is the ability to have mathematical proofs that the code written has compiled properly, Schvey said.

“Being able to check for certain error vectors is a very powerful concept, especially if you are deploying a large scale multi-party infrastructure with a lot of value going through it,” he said.

Indeed, the proof of concept marries two hard technical challenges: interoperability and formal verification. And there’s an important connection between the two, Sams pointed out.

“Imagine an end state of distributed market infrastructure where you have an end-to-end process flow, occurring through multiple systems,” he said.

“It’s obviously going to be very important that at the semantic layer, a system taking over a process from another system, and vice versa, understands and can demonstrate exactly what the business logic is that they are consuming or producing for another system to consume.”

Two roads image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Barclays, Goldman Champion ISDA Standard for Blockchain Derivatives

Blockchains and smart contracts were supposed to fix the inefficiencies and slash the costs of derivatives trading, but two years since such promises came in vogue, a foundational issue has yet to be ironed out.

Before banks and traders can rely on a distributed ledger technology as the vaunted “single record of truth,” there first needs to be better standardization. Yet as it stands, they use a hodgepodge of data structures and formats to track the life cycle of trades, reflecting in part the variety of regulatory requirements imposed after the 2008 financial crisis.

Simply put, without a common language, there’s not much to be gained from having a common ledger.

Now, the financial world’s blockchain evangelists are pinning their hopes on a broader industry effort to harmonize the way data is presented and reported, regardless of the platform used. Known as the common domain model (CDM), it was proposed by the International Swaps and Derivatives Association (ISDA) in May of last year and has the support of blockchain tech startups such as R3 and Axoni.

But perhaps the biggest champion of CDM as the key to making blockchain a reality in the derivatives space is Barclays.

The U.K.-based bank recently set up an internal CDM adoption working group, and will be presenting its vision for how smart contracts can be combined with the concept Thursday at ISDA’s annual meeting in Miami, Florida.

It’s a pivotal time for the project, as ISDA is expected to release the first iteration of the blockchain-compatible version of CDM early this summer.

Sunil Challa from the business architect team at Barclays was emphatic about hitting the reset button.

“There is a shiny new technology promising to be a panacea for fixing many post-trade processing issues. So, now is an opportune moment to re-engineer our processes,” Challa told CoinDesk, adding:

“Simply replicating the existing fragmented state would be a colossal missed opportunity.”

A common tongue

Stepping back, Barclays has played a central role in the convergence of DLT, smart contracts and common data standards.

Two years ago the bank showcased a prototype of how smart contracts could be used throughout the lifecycle of a derivatives trade, including negotiating an ISDA master agreement, entering individual trades and performing the trades on a distributed ledger.

While the concept has caught on, the standards challenge remains in the way of adoption, according to Dr. Lee Braine, a member of the investment bank CTO Office at Barclays. On the one hand, distributed ledger platforms are now reaching acceptance by some of the most systemically important market infrastructure incumbents, Braine said.

“But what we haven’t yet seen is adoption of common standards by the industry,” he said. “What we ultimately need in the derivatives space is multiple market infrastructures, including multiple clearing houses, adopting a common standard for data formats, reference data, transactional data, and business processes.”

That’s where Barclays and others believe the CDM comes in.

Traditionally, banks have worked to standardize the format of messages between them, but kept their own idiosyncratic ways of communicating data internally – like a country with a national language but numerous local dialects.

But, as Braine pointed out, the CDM and DLT share a common goal in going further and standardizing data within institutions. (Speaking the national language at home, as it were.)

In this way, the CDM could provide an alternative route for addressing the looming challenge of interoperability between different blockchain platforms. At present you often hear industry participants talk about being “blockchain-agnostic” because it’s too risky to bet on just one platform provider.

To illustrate this point, Braine described a future scenario in which banks are trading with each other on different distributed ledgers. If there are some counterparties on one network and other counterparties on other networks, then does that mean you would need to host a node on every network? Or are they going to be genuinely interoperable?

“A simplistic solution would be to revert to the traditional model of silos with messaging between them, but that risks replicating the fragmentation of the past,” said Braine.

“If you instead transition to the CDM, then at least there is opportunity to standardize on data structures, lifecycle events etc.”

And if that isn’t persuasive enough, Barclays estimates significant cost savings to the derivatives market. Its working group projected around 25 percent efficiency gains from adopting CDM just in the clearing space, and around $2.5 billion in annual run costs.

Regtech rising

Barclays isn’t alone among financial in advocating for the CDM, of course.

Goldman Sachs is also a supporter, and sees the common data standard, when combined with shared ledgers, as a way to alleviate some of the pressure created by the increased reporting requirements under regulations like the European Union’s MiFID 2.

Ayaz Haji, the technical architect for the MiFID 2 program at Goldman Sachs, said a common representation of product terms and lifecycle events should not only reduce inconsistencies but also provide a platform for further efficiencies.

The investment bank won’t rule out alternatives to blockchain in adopting the standard, however.

“Those who are closest to the CDM project recognize that a persistent shared implementation such as DLT would be the most optimal way to use the model,” said Haji. “That said we are also open minded about potential implementations and look forward to vendor feedback to the version of the model which is due to be published by ISDA shortly.”

Less equivocal than Goldman, Barclays is making a forceful case for using DLT in conjunction with the common standard.

For example, Braine also pointed out a way that a common data standard could amplify another benefit of blockchain.

A commonly pitched use case for the tech is the streamlining of regulatory reporting – the regulator can operate a node on the blockchain and pull data directly from it. The U.K.’s Financial Conduct Authority has already tried this out, participating in a proof-of-concept for regulatory reporting of mortgage transaction data using R3’s Corda platform.

The problem is that in the current world, banks have their main trading data, and their risk models basically duplicate that and perform a simulation.  

“If we were able to use a common domain model, we would be able to use exactly that same data. We wouldn’t need to write two versions of what’s going on, one just for the risk model,” said Braine.

Ultimately, though, reaching common standards, like implementing blockchains, is a team sport, and the game is still far from won.  

Clive Ansell, head of market infrastructure and technology at ISDA, concluded:

“There is a fantastic opportunity … but the level of success will depend on the industry operating to a common data and processing model.”

Barclays image via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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LedgerX's Bitcoin Derivatives Trading Is Up 7X Since Launch

Bitcoin trading platform LedgerX has seen a sevenfold increase in volume in the six months following its launch of cryptocurrency derivatives.

Chief operating officer Juthica Chou told CoinDesk that the startup has seen roughly $7.5 million traded weekly through 700 swaps and options contracts. Since the platform launched its derivatives products, it has cleared $130 million notional – meaning the total number of assets traded at their spot price during the time of the transaction.

LedgerX kicked off trading of its regulated swaps and options contracts last October, after receiving approval from the U.S. Commodity Futures Trading Commission in July of 2017. Within its first week, the startup saw 176 contracts traded with a notional value around $1 million, as previously reported.

Since then, average trade volume has grown an average of 40 percent month-over-month, Chou said. Currently, 2,000 contracts are of open interest, with the longest-dated active options being $15,000 and $25,000 strike calls slated to expire in December 2019. In other words, the investors holding those contracts can purchase the assets if bitcoin reaches those levels before next December. However, traders will only make money if bitcoin does actually exceed that level, as previously reported.

Chou said the cryptocurrency market’s recent dip did not have a significant impact on swap and options trading, explaining:

“Significant corrections remind people that there are ways to monetize expected volatility even when price goes down and we’ve seen that reflected in our trading activity. Our sophisticated participants are not just buy-and-hold people, let me put it that way.”

LedgerX has 90 individual and institutional traders making up its participant base, she said. Both younger, relatively newer traders and more traditional ones trade on the startup’s platform.

While LedgerX only trades bitcoin swaps and options, the company is planning to expand, Chou said. Specifically, the startup “plans to add ethereum support in the near future.”

Bitcoin tokens image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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UK Finance Watchdog Issues Warning on Crypto Derivatives

The U.K.’s financial watchdog has warned that companies offering services around cryptocurrency derivatives “likely” need to be authorized by the agency.

In a statement posted to its website Friday, the Financial Conduct Authority (FCA), said that although it doesn’t consider cryptocurrencies to be currencies or commodities for regulatory purposes, cryptocurrency derivatives may be financial instruments under current directives.

The statement said:

“Firms conducting regulated activities in cryptocurrency derivatives must, therefore, comply with all applicable rules in the FCA’s Handbook and any relevant provisions in directly applicable European Union regulations.”

The FCA continued to explain that it’s “likely” that companies seeking to offer derivatives linked to cryptocurrencies or tokens issued through ICOs will need to obtain authorization. The products mentioned include cryptocurrency futures, cryptocurrency contracts for differences (CFDs) and cryptocurrency options.

The agency added, however, that an ICO “may or may not fall within the FCA’s regulatory purview depending on the nature of the tokens issued.”

The FCA finished with a warning that states: “If your firm is not authorized by the FCA and is offering products or services requiring authorization it is a criminal offence. Authorized firms offering these products without the appropriate permission may be subject to enforcement action.”

While the FCA has been generally positive on blockchain technology, saying in 2016 that it does not plan to regulate the blockchain industry for now as it believes it needs “space” to grow, it has taken a sterner stance on cryptocurrency and ICOs.

In December 2017, the head of the authority, Andrew Bailey, warned bitcoin investors to be prepared to “lose all your money,” adding the risks are similar to gambling.

The same month, the FCA announced that it would gather evidence and conduct a deeper examination on ICOs. In a feedback statement, the regulator said it would carry out an analysis on the applicability of U.K. laws to the ICO funding model and assess if there is need for “further regulatory action.”

City of London image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.