The growing Bitcoin derivatives sector continues to gain traction in the global financial markets operating environment, as news of the first transaction executed on a regulated exchange gives a much needed boost to the instrument. Participants in the volatile bitcoin market welcome the move that could revolutionize the landscapes of virtual currency trading.
TeraExchange, a regulated Swap Execution Facility (SEF) under the authorization of the US derivatives watchdog, the CFTC, reported that two parties completed the bitcoin transaction. The initial trade was completed between digitalBTC, the world’s first bitcoin-focused company to commence trading on a major stock exchange, and a hedging counterparty.
Christian Martin, CEO and co-founder of TeraExchange, spoke about the growing demand for crypto-based instruments, he said: “There is significant, growing demand for a hedging instrument like this. Not only does the swap provide a much-needed risk management tool but it instills confidence and credibility to the entire Bitcoin community at a vital time in the market’s development.”
TeraExchange offers a USD/Bitcoin swap, the instrument provides institutional market participants with the first regulated risk transfer mechanism to hedge or gain exposure to bitcoin. All trading of USD/Bitcoin swaps on TeraExchange are subject to the rules and regulations of TeraExchange and the CFTC.
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Bill Brindise, Chief Investment Officer at digitalBTC, a liquidity provider for bitcoin swaps on TeraExchange, commented in a statement: “We are delighted to be working closely with TeraExchange and are excited they have created a regulated platform for institutional traders. This swap is an important investment vehicle that has been sorely needed by bitcoin investors, retailers and miners. Like TeraExchange, digitalBTC is no stranger to regulation since stock exchange listing requirements mandate complete transparency into our business activities and financial reporting.”
TeraExchange became the first regulated entity to initiate the move into bitcoin derivatives. The trading venue offers a number of financial instruments including swaps and derivatives. Over a six month period, TeraExchange co-operated with the financial watchdog in order to roll out the required rulings around the product.
“The CFTC Staff was pragmatic in their approach and comprehensive in their analysis,” said Leonard T. Nuara, President and co-Founder of TeraExchange, “and after months of refining the swap and the index we are excited that bitcoin derivatives trading has commenced on our platform.”
TeraExchange reported that its recent development, the Tera Bitcoin Price Index, will be used as the settlement rate for the USD/Bitcoin swap. The financial trading venue launched the index at the same time as its regulated platform last month, the new portal employing 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.