TL;DR: This morning, CEO Kelly Loeffler relayed physically-settled bitcoin futures exchange Bakkt intends to launch what it calls “the first regulated options contract” for their increasingly popular instrument. After a rocky rollout process and early lackluster response to its live implementation, Bakkt is riding a nice wave amid a brutal speculative market.
Bakkt Regulated Options Contract for Bitcoin Futures
The entire premise of Bakkt, an exchange backed (not a pun) by the muscle of Intercontinental Exchange (ICE), owner of legacy boards such as the New York Stock Exchange (NYSE), is to tame bitcoin’s problematic spot-price volatility — problematic, that is, for Wall Street and institutional investors who want a piece of money’s future but without grave uncertainty.
That for sure was on display as BTC plunged by $1,000 in something like 5 minutes this week, sending the coin to its lowest levels since May … and dragging the market with it. What seems to be happening, albeit mildly and in small chunks, is Bakkt might be viewed as a hedge shorter term. It is coming off one of its best days by volume yesterday, for example, clearing the $5 million mark, as noted today by The Block.
— The Block (@TheBlock__) October 24, 2019
And while it’s far too early to claim any kind of trend, it is a good time for a public relations play. “We’re committed to bringing trust and utility to digital assets,” Loeffler continued, “and the options contract is an example of the many products we’re developing for regulated markets.” It will be pegged to their developing, proprietary benchmark which the CEO also acknowledges “is designed to hedge or gain bitcoin exposure, generate income, and offer cost and capital efficiencies.” What does institutional finance love? Credit, and lots of it.
It appears regulatory approval is already in the bag, as the CFTC is long familiar with the company’s parent, ICE. The new product slated for early December will allow for “margined contracts, and cross-margining with the underlying futures contract,” a cash settlement choice, and, interestingly a “European style option” which apparently “avoids early exercise and reduces operational burdens.” They’re also teasing fee waivers through the end of the present year, hoping the reach of its ICE-parent global access will help accredited investors dip toes into cryptocurrency.
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