TeraExchange, a swap execution facility (SEF) registered with the US Commodity Futures Trading Commission (CFTC), has launched the first regulated platform for bitcoin derivatives and a spot bitcoin price index.
Trading of US dollar (USD)-bitcoin swaps will be subject to the rules and regulations of TeraExchange – launched last October 2013 as a multi-asset class platform for trading various financial instruments – and the CFTC.
TeraExchange said that the bitcoin derivative and the Tera bitcoin price index were created to meet the growing demand of global merchants, payment processors, miners, and hedge funds for an efficient hedging tool. It added that institutional market makers have already offered to provide continuous markets over a range of tenors.
According to TeraExchange demand for regulated bitcoin derivatives trading and hedging has increased considerably following the announcement last March of the first unregulated USD/bitcoin swap, structured by a TeraExchange affiliate. TeraExchange has worked with the CFTC for over six months to ensure that the swap and the index now meet all requirements for regulation.
“The structure of the bitcoin swap marketplace reflects extensive client input, providing participants the benefits of transparent price discovery and efficient risk transfer,” said Leonard Nuara, president and co-founder of TeraExchange.
The Tera bitcoin price index employs a dynamic algorithm that compiles and filters data on a real-time basis from a number of widely utilised global bitcoin exchanges. For inclusion 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.
“Regulated bitcoin swap trading provides institutional clients with a more efficient and confident way to hedge and trade,” said Christian Martin, TeraExchange’s chief executive officer (CEO) and co-founder. “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.”
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