These past few days have been filled with misinformation and we feel like we owe it to our customers (and potential customers) to set the record straight. Personally, I find it most helpful to think about LedgerX in the context of a clear and detailed timeline to help you get a sense of where we’ve been, where we are now, and what we are doing going forward.
Not to toot our own horn, but the majority of the CFTC’s current regulatory framework for digital asset exchanges and clearinghouses was initiated by LedgerX. In early 2014 the founders of LedgerX made a bet that BTC would be deemed a commodity and fall under the CFTC’s jurisdiction. Drawing on their prior work experience at Goldman Sachs, they knew the value that a regulated derivatives exchange would bring to the nascent cryptocurrency market.
So they reached out, got a meeting with some of the most senior directors at the CFTC in June 2014, and the process began. I won’t bore you with the details of what happened between 2014 and 2017, but let’s say the founders reflect back on that period of their lives not very fondly. They spent literally 3 years of their lives working with the CFTC on this totally new and revolutionary asset class without any guarantee they would get the licenses they needed. They were not alone at this stage, but they were definitely one of the first to try and blaze this path for digital assets. These years were so impactful to how the regulators now think about BTC that they even asked our CEO Paul to sit on the CFTC’s Technology Advisory Committee.
Now we get to the good stuff. LedgerX was able to secure some funding from our amazing investors, closed a Series B, and that opened the door to the two most important days in LedgerX history. July 6th and 24th are the days we received our Swap Execution Facility (SEF) and Derivatives Clearing Organization (DCO) licenses from the CFTC. These were THE FIRST of their kind for a digital asset exchange…and that you can quote me on. I’ll even include the link to all of our licenses in the appendix if you are into that sorta thing. With these two licenses in hand, the realization of the company’s goal was seemingly in reach, now we just had to execute.
LedgerX officially launched our institutional trading platform. Now don’t lose me here but the details are important; under a Swap Execution Facility we could legally only service what the CFTC calls Eligible Contract Participants (ECPs). Think accredited investor but even stricter. For example, individuals would need a net worth greater than $5mm if they wanted to “hedge” risk on the platform, $10mm if they wanted to do “speculative” trading.
The founders never wanted to make LedgerX exclusive; one of the beautiful aspects of Bitcoin is that it is truly the asset of the people. Accessible to all, regardless of how much money you have. But we are regulated, and we have a very strict framework that we need to operate within to achieve our goals.
So with that cleared up, back to the good stuff. LedgerX is finally live! We are on-boarding institutional participants and rolling out new products. We launched a virtual trading pit, got approval for a BTC Halving contract, and achieved our first months of profitability as a company! Something, however, was keeping Paul up at night: it never sat well with him that we could not be a firm that was accessible by everyone…
At this point LedgerX has been operational for over one year. The business is growing but Paul decides to put in motion a critical new business initiative. He sends Juthica down to DC to start the process they dreaded all over again, flashbacks to 2014 rolling through their minds. We start another application with the CFTC. This time we are applying for a Designated Contract Market (DCM). This license is commonly known as the license to trade and clear Futures contracts BUT it also allows you to trade swaps/options. The less obvious nuance to a DCM license is that it removes the requirement that all our participants must be Eligible Contract Participants. Out of this little difference in regulation, Omni is born.
LedgerX receives approval from the CFTC to operate a Designated Contract Market (DCM). Again, I’m going to bore you with regulation but please stay with me here because this is also very important. The DCM license allows LedgerX to launch a retail trading platform for swaps and options. We also want to list futures, and in order to do so we need our DCO license to include futures (right now we clear swaps and options). LedgerX formally requested that the CFTC add futures to our DCO license we received in 2017. We are still awaiting this amendment. This very small but crucial detail is what set off the chain of events leading to this blog post.
LedgerX officially launches our Omni retail trading platform. Quick shout out to our design team and engineers for some of the hardest work I’ve witnessed first-hand getting an entirely new platform off the ground (we are hiring for these teams here https://www.ledgerx.com/careers). Omni is now live with trading, we have on-boarded real retail customers who have executed real trades with real funds.
Due to miscommunication around a single word between a principal, a PR team member, and one of our most valued publication relationships, it was incorrectly announced that LedgerX is live with trading futures for retail. As you guys have learned if you actually read this blog post, the devil is in the details here. We are the first US regulated platform to offer physically settled Bitcoin derivatives to retail investors. We have not launched futures yet. We are still waiting on our clearing amendment which we are working tirelessly towards @CFTC.
So there you have it. That was my best attempt at making it very clear where we were, where we are at, and where we are going. If you have any specific questions, please reach out to [email protected]. If you are inspired by a true underdog story, a group of individuals trying to pave a new path with a revolutionary asset class, please sign up for the Omni waitlist at https://www.ledgerx.com/omni/.
https://www.cftc.gov/PressRoom/PressReleases/pr7584-17 (SEF Approval)
https://www.cftc.gov/sites/default/files/idc/groups/public/@otherif/documents/ifdocs/orgledgerxord170706.pdf (SEF Order of Registration)
https://www.cftc.gov/PressRoom/PressReleases/pr7592-17 (DCO Approval)
https://www.cftc.gov/sites/default/files/idc/groups/public/@otherif/documents/ifdocs/ledgerxdcoregorder72417.pdf (DCO Order of Registration)
https://www.cftc.gov/PressRoom/PressReleases/7945-19 (DCM Approval)
https://www.cftc.gov/sites/default/files/filings/documents/2019/orgledgerxdcmorder190624.pdf (DCM Order of Registration)