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(Kitco News) - LCH SA, the European-based arm of the London Clearing House (LCH) – which is majority owned by the London Stock Exchange Group (LSEG) – has announced that it will begin offering the clearing of Bitcoin index futures and options contracts traded on GFO-X, pending regulatory approval.
Futures and options products allow traders to bet that the price of an asset will rise or fall in a certain timeframe while only being required to fund a fraction of the value of their trades.
The new service will be made available through LCH DigitalAssetClear, a new segregated clearing service developed by the clearing house, the press release announcing the new service said.
DigitalAssetClear was developed by GFO-X, a UK digital asset derivatives trading platform that has received approval from the Financial Conduct Authority to operate as a multilateral trading facility. LCH SA also participated in its development to ensure its digital asset derivatives trading and clearing requirements can be met within a secure, highly regulated environment.
Bitcoin index futures and options contracts on LCH SA will be cash-settled through LCH DigitalAssetClear and will be based on the GFO-X/Coin Metrics Bitcoin Reference Rate (GCBRR), a benchmark regulation-compliant reference rate of the U.S. dollar price of Bitcoin. This allows firms “to trade futures and options on the Bitcoin reference index directly,” the announcement said.
“Bitcoin index futures and options are a rapidly growing asset class, with increasing interest among institutional market participants looking for access within a regulated environment they are familiar with,” said Frank Soussan, Head of LCH DigitalAssetClear. “Offering centralised clearing for these cash-settled dollar-denominated crypto derivatives contracts on GFO-X is an important development for the market.”
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LCH DigitalAssetClear will operate a fully segregated clearing service, which includes a segregated default fund, to support the clearing of these instruments. The new service is expected to go live in Q4.
“Recent market events in the trading of digital assets have highlighted the need for a safe, regulated venue where large financial institutions can trade at scale, while keeping their clients’ assets protected,” said Arnab Sen, CEO and Co-Founder of GFO-X. “As the UK’s first regulated and centrally cleared trading venue focused entirely on digital asset futures and options, our joint vision is to ensure digital asset derivatives’ trading and clearing requirements and growing demand can be met within a secure, highly regulated environment.”
