Meet the First CFTC Regulated Bitcoin Derivatives Trading: TeraExchange

By Jon C. Ogg Published Sep 12, 2:10PM EDT

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Bitcoin may have found yet another legitimizing feather for its cap. TeraExchange, a swap execution facility registered with the Commodity Futures Trading Commission (CFTC), has launched what is called the first regulated platform for bitcoin derivatives and a spot bitcoin price index.

TeraExchange said that the trading of U.S. dollar/bitcoin swaps will be subject to the rules and regulations of TeraExchange and the CFTC. Effectively, this allows global merchants, miners, payment processors, financial speculators and hedge funds a hedging tool for bitcoins. TeraExchange also said that institutional market makers have already offered to provide continuous markets over a range of tenors.

TeraExchange went on to say that it has worked with the CFTC for more than six months to ensure that the swap and the index now meet all requirements for regulation.

The Tera Bitcoin Price Index employs a dynamic algorithm that compiles and filters data on a real-time basis from a number of widely utilized global Bitcoin exchanges. In order to be included in the index, these exchanges are required to execute and maintain an information sharing agreement with TeraExchange, as required by the CFTC. TeraExchange is the index administrator and calculation agent.

After looking at the site, the first approval for this effort dates back to September of 2013. The CFTC temporary registration statement said (September 19, 2013):

The U.S. Commodity Futures Trading Commission (CFTC) approved on September 18, 2013, the application of TeraExchange, LLC (TeraExchange) for temporary registration as a swap execution facility (SEF). TeraExchange is a Delaware limited liability company and is a wholly-owned subsidiary of Tera Group, Inc., a Delaware corporation.

Leonard T. Nuara, president and co-founder of TeraExchange, said on Friday’s launch:

The structure of the Bitcoin swap marketplace reflects extensive client input, providing participants the benefits of transparent price discovery and efficient risk transfer. Throughout this comprehensive process the CFTC Staff has been thoughtful, diligent and thorough in their analysis and review.

Christian Martin, CEO and co-founder, also said:

Regulated bitcoin swap trading provides institutional clients with a more efficient and confident way to hedge and trade. A robust price index also helps the growing bitcoin trading community to accurately mark-to-market positions while establishing trust and stability in this growing global marketplace.

About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.