A leading Swap Execution Facility (SEF) has extended its product offering to include virtual currencies. TeraExchange has created a Bitcoin derivatives exchange as interest in the instrument continues to expand. The move strengthens the position of virtual currencies as they pitch for recognition as a tradable asset class.
The New Jersey-based financial trading venue reported that it has launched the first regulated platform, subject to regulatory approval, for Bitcoin derivatives and a spot bitcoin price index. The index will be a price provide for the US dollar against Bitcoin Swaps.
TeraExchange’s latest offering continues on from its initial entry in to the world of virtual currencies where it created the world’s first regulated Bitcoin Swap in March 2014. The new offering could revolutionise the marketplace as participants look for recognised price sources for managing risk, furthermore, the new price index will support providers looking to promote the financial instrument with a stable and clean market data feed.
Leonard T. Nuara, President and co-Founder of TeraExchange, commented about the new product: “The structure of the Bitcoin swap marketplace reflects extensive client input, providing participants the benefits of transparent price discovery and efficient risk transfer.”
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.
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Bitcoin, a virtual currency on the receiving end of mixed views on its status as a financial instrument; on the one hand, providers are extending its usage for purchases, however at the same time, regulators are cautious of the way individuals can fall short of limited rules and regulations governing the product.
US authorities have been addressing ways in which the virtual currency can become legal. In 2013, the US Senate held a meeting discussing the instrument, looking at both its current use and how it can be used as a payment system.
TeraExchange has been in communication with the US financial watchdog, the Commodity Futures Trading Commission (CFTC), Mr Nuara added: “Throughout this comprehensive process the CFTC Staff has been thoughtful, diligent and thorough in their analysis and review.”
TeraExchange offers users a range of financial products including; interest rate, credit and foreign exchange (FX) derivatives. The extension could open up a new wave of activity on SEFs which have seen low trading volumes in the FX product range.
The firm’s CEO and co-founder, Christian Martin explains: “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.”
Volatility in the Bitcoin market has greatly reduced after the spike in the price of a Bitcoin in 2013, volumes at Bitcoin exchanges having decreased significantly to 2012 levels as the price stabilises below the formidable $1,000 mark. According to European-based Bitstamp, the current price of a Bitcoin is $472.54.