Bitcoin Futures on ICE Grow Nearer With Custody Warehouse Start

(Bloomberg) -- Intercontinental Exchange Inc. is closer to offering Bitcoin futures trading as its Bakkt unit opens its digital-asset custody warehouse today to customers. Here are the nuts and bolts of how it will work.

• Once the futures begin trading on Sept. 23, actual Bitcoin can be acquired by going long in the one-day or 30-day contract and holding to delivery.
• Trades will occur on ICE Futures U.S.
• Clearing is through ICE Clear U.S.
• Custody is handled by Bakkt Trust Co., which received a charter from the New York State Department of Financial Services last month to hold customer tokens. This warehouse will move Bitcoins from short positions to long positions at expiration, resulting in actual delivery of Bitcoin.

• The early opening of the warehouse is meant to allow customers to move Bitcoin in and out of their accounts to become comfortable with the process prior to Sept. 23.
• Both futures contracts will be margined, meaning there’s no need for users to pre-fund their trading accounts or collateralize them at 100% as was previously envisioned by ICE.
• ICE hopes the futures will create price discovery for Bitcoin apart from any cash market influence, as the company has cited abuse and manipulation in spot Bitcoin trading. Whether that will come from the one-day or 30-day contract is yet to be seen.
• It’s rare in the futures world for a company to act as exchange, clearinghouse and settlement authority; this last part delayed ICE’s plans for months as it sought the NYDFS approval to become a trust.
• This is not the first Bitcoin futures contract, but the first to offer physical delivery. CME Group and Cboe Markets have both offered Bitcoin futures that are cash-settled. Cboe discontinued its contract.
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To contact the reporter on this story: Matthew Leising in Los Angeles at mleising@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Dave Liedtka, Rita Nazareth

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