Bakkt Launching First CFTC-Regulated Options Contract for Bitcoin Futures in December

Siamak Masnavi

Bakkt, the crypto custodian and crypto derivatives exchange subsidiary of Intercontinental Exchange (ICE), the operator of the New York Stock Exchange (NYSE), announced on Thursday (October 24) that it will launch the first CFTC-regulated options contract for Bitcoin (BTC) futures on December 9.

Bakkt CEO Kelly Loeffler explained in a blog post that the Bakkt Bitcoin Options contract will based on the Bakkt Monthly Bitcoin Futures contract. She then went on to say that this new product is being introduced due to customer feedback, and it is "designed to hedge or gain bitcoin exposure, generate income, and offer cost and capital efficiencies." 

As for regulatory approval, Loeffler said that ICE Futures U.S., which is a Designated Contract Market (DCM), was able to use the self-certification filing procedure of the U.S. Commodity Futures Trading Commission (CFTC) to get the new product approved. 

Here are a few of the main features of the Bakkt Bitcoin Options contract:

  • "Capital efficiency: Margined contracts, and cross-margining with the underlying futures contract"
  • "Cash or physical settlement: Options will settle into Bakkt’s monthly bitcoin futures contract with time to roll, close out positions or take physical delivery"
  • "European style option: This contract design avoids early exercise and reduces operational burdens"
  • "Attractive fees: $1.25 per options contract (1 contract = 1 bitcoin) starting in January 2020, following the fee waiver in December 2019"

Trading in Bakkt Bitcoin Futures went live on September 23. On Wednesday, the daily trading volume of its monthly Bitcoin futures reached almost $5 million with "a record 590 contracts" changing hands.

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