Bakkt Starting User Acceptance Testing for Bitcoin Futures and Custody in July

Siamak Masnavi

On Monday (May 13), Kelly Loeffler, the CEO of Bakkt (which is owned by Intercontinental Exchange, the parent company of the New York Stock Exchange), announced some important news regarding the upcoming launch of its Bitcoin futures products.

As most of you probably know already, on 3 August 2018, Intercontinental Exchange (ICE), "a leading operator of global exchanges, clearing houses, data and listings services," announced that it was starting a new company called Bakkt that would be "working with a marquee group of organizations including BCG, Microsoft, Starbucks, and others, to create an integrated platform that enables consumers and institutions to buy, sell, store and spend digital assets on a seamless global network."

ICE also said that as "an initial component of the Bakkt offering," its "U.S.-based futures exchange and clearing house" planned to "launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November 2018, subject to CFTC review and approval." That launch has been delayed since Bakkt is still waiting the U.S. Commodity Futures Trading Commission's approval.

In a blog post published earlier today, Loeffler provided some important updates regarding the Bitcoin futures contracts that will be launched later this year on the Bakkt platform:

  • Bakkt's customers (many of whom "still waiting to get in") have helped with "the initial product offering."
  • Bitcoin futures will be listed "on a federally regulated futures exchange in the coming months."
  • Bakkt is working with its customers "over the next several weeks to prepare for user acceptance testing (UAT) for futures and custody," which are expected to start in July.

There will be two Bitcoin futures contracts:

  • "A daily settlement bitcoin future, which will enable customers to transact in a same-day market."
  • "A monthly bitcoin futures contract will enable trading in the front month and across the forward pricing curve."

The Bakkt CEO also mentioned that:

  • "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 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."
  • "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."

This announcement by Bakkt has helped the Bitcoin price surge to even higher levels than seen during the past weekend. According to CryptoCompare, BTC is currently (15:20 UTC on May 13) trading at $7,827, up 12% in the past 24-hour period:

BTC - 24 Hour CC Chart - 13 May 2019.png

Featured Image Courtesy of Bakkt