LedgerX

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LedgerX
Ledgerxwhite-730x438.png
Founded 2014
Headquarters New York, New York
Key People Zach Dexter, CEO and Co-Founder; Larry E. Thompson, interim CEO and Lead Director of Ledger Holdings; Paul Chou, Co-Founder and former CEO; Juthica Chou, Co-Founder and former COO and CRO;
Products Trading and clearing of bitcoin swaps and options
Twitter @ledgerx
Website LedgerX Homepage
Blog LedgerX Blog

LedgerX, LLC was the first federally regulated swap execution facility (SEF) and clearing house to list and clear fully-collateralized, physically-settled digital currency swaps and options. It was founded by Juthica Chou and Paul Chou, both of whom held executive positions until they were placed on administrative leave in December 2019.[1] Although the exchange received a designation as a contract market (futures exchange) on June 24, 2019,[2] LedgerX could not list futures until until after its clearing license was amended to include futures clearing more than a year later on September 2, 2020.[3] LedgerX listed mini bitcoin futures two days later on September 4.[4]

Background

Seeking to offer bitcoin options, LedgerX LLC was registered by the CFTC as a swap execution facility (SEF) on July 6, 2017 and as a derivatives clearing organization (DCO) on July 24, 2017.[5][6] The DCO registration limited LedgerX to clearing fully-collateralized digital currency swaps.[7] LedgerX was also designated a contract market (DCM) on June 24, 2019.[8]

LedgerX was established as a Delaware limited liability company in April 2014 and applied to the CFTC for its registration that August. According to press stories in August 2014, LedgerX was funded with $4.5 million by Lightspeed Venture Partners, Google Ventures, SV Angel and Fenway Summer, among others.

The board of directors of LedgerX Holdings, the parent company, placed company co-founders Paul Chou and Juthica Chou on administrative leave and appointed Larry E. Thompson as interim CEO on December 9, 2019.[9] LedgerX announced on the January 10 that Zach Dexter, a co-founder and former chief technology officer had been appointed CEO.[10]

The announcement was preceded earlier in the day by reports in the press that Nicholas Owen Gunden, an investor and board member, had complained to the LedgerX Holdings board as well as the CFTC's Office of the Inspector General that the exchange was in disarray and, among other things, might no longer be in compliance with CFTC regulations. Gunden also expressed concern that MIAX was attempting to take control of the company.[11] Later the same day, The Block Crypto reported that MIAX and Huiyin had injected $4 million in new funds into the company.[12]

The "order of registration" from the CFTC was amended on September 2, 2020 to permit LedgerX to clear futures and options on futures as well as to clear non-digital asset based products.[13]

Products and services

LedgerPrime

Ledger Holding Inc., the parent of LedgerX, established LedgerPrime to make markets in LedgerX contracts as well as in the OTC markets. It began trading at about the time of the launch of trading on the SEF. In early March 2019, LedgerPrime received new investments of $12 million dollars along with commitments for $8 million more, according to CoinDesk at the time.[14] LedgerPrime is a quantitative digital asset investment firm.[15]

In March 2021, LedgerPrime executed the first-ever trade of BitVol, a bitcoin volatility index created by T3 Index, creators of the SPIKES Index. Simon Ho, CEO of T3 Index, said in a press release that the trade consisted of a March expiry 1X2 BitVol call spread, in which the counterparty client bought the spread at even premiums, or “zero cost” - ie, the cost of the spread was negated so that it effectively cost nothing to buy.[16][17]

Bitcoin swaps (options and day-ahead forwards)

The LedgerX website reported that the first trades of bitcoin swaps occurred on October 16, 2017, when 31 day-ahead forward contracts, which qualify as swaps, changed hands.[18][19]

On December 2, 2019, LedgerX introduced "mini-bitcoin" products by splitting its current one bitcoin swap contracts into one one-hundredth of a bitcoin contracts.[20] The change in size was meant to extend to futures contracts although they were not yet listed for trading.

In a possibly related development, this contract change was followed a week later by the removal of Paul Chou and Juthica Chou from their positions as CEO and president of LedgerX, respectively.[21]

Bitcoin futures

The New York Times reported in an April 2, 2019, story titled "Amid Bitcoin Uncertainty, ‘the Smart Money Knows That Crypto Is Not Ready'" that LedgerX was applying to regulators for permission to provide services to retail customers.[22] On April 15, 2019, LedgerX announced that it had applied the previous November to the CFTC for registration as a designated contract market in order to trade bitcoin futures.[23] In a blog post on the same day, the company said that its futures market platform, dubbed "Omni," would be available directly to retail customers, without mention of intermediation.[24].

LedgerX's June 2019 registration as a futures market permits LedgerX to trade unspecified futures contracts. The designation order does not permit LedgerX's members to clear customer trades.[25] LedgerX COO and Co-Founder Juthica Chou said that the company is looking forward to being the first futures market to list physically delivered bitcoin futures. LedgerX indicated that it will wait until Omni, its futures market platform, was rolled out before it begins trading.[26] Omni was to be provided to futures customers, not just exchange members.

Misunderstanding with CFTC

On the morning of July 31, 2019, CoinDesk, an online news service, broke the story that LedgerX had launched trading in physically delivered bitcoin futures. The scoop was based on an exclusive interview between CoinDesk and CEO Paul Chou, according to the article. [27] However, John Lothian News was unable to confirm the details of the story, although CoinTelegraph and others published the same news. In fact LedgerX had not yet launched physically delivered bitcoin futures.[28] By the afternoon of the next day, CoinDesk had reported that its conversation with Paul and Juthica Chou about the futures launch had taken place sometime earlier than July 31 and that Ms. Chou had told CoinDesk after the July 31st article was published that the CFTC was still not permitting LedgerX to launch the bitcoin futures. She also told CoinDesk, "We submitted the amendment on Nov. 8, 2018, it’s been more than 180 days, we don’t know why that’s the case [that it has not been approved]." On August 1, Paul Chou threatened legal action against the CFTC in a Twitter thread.[29]

As mentioned above, LedgerX received permission from the CFTC to clear futures on September 2, 2020, after which date it could first list futures and options on futures.[30] It listed two monthly and two quarterly mini (0.01 BTC) contracts on September 4, 2020.[31]

Ethereum

In September 2018, LedgerX told The Block Crypto, a cryptocurrency news service, that LedgerX would begin offering Ether swaps, pending approval from the CFTC.[32]

Halving contract

On February 5, 2019, LedgerX announced that it would offer a binary options contract allowing its institutional clients to bet on the date of "halving" (also referred to as "halvening"), the date on which block number 630,000 will be added to bitcoin's blockchain, causing the reward for mining bitcoin to get cut in half. LedgerX said it will offer five contracts allowing its customers to bet on specific periods of time when this will occur. CEO and Co-Founder Paul Chou told CoinDesk in an email that this service is, in part, an effort to crowdsource information about when the halving will occur; market participants with key information are incentivized to share that information by betting on specific time periods.[33][34]

Indexes

On January 14, 2019, LedgerX announced the launch of its volatility index, LedgerX Volatility Index (LXVX), based on price data from the LedgerX options market.[35]

The company announced it had launched the "BitVol Index" in partnership with index provider T3 on July 10, 2020. The new index uses price information from other options trading platforms and exchanges in addition to LedgerX's own data.[36]

Swaps platform trading volume

Year Total Annual Volume Percent Change
2019 180,689 476.8%
2018 31,324 594%
2017 4,513

Key People

  • Larry E. Thompson - Interim CEO and Lead Director of Ledger Holdings
  • Paul Chou - Co-Founder, former CEO
  • Juthica Chou - Co-Founder, former COO and CRO
  • Zach Dexter - CEO and Co-Founder

References

  1. LedgerX Announces Change to Executive Leadership. PR Newswire.
  2. Order of Designation. CFTC.
  3. Press Release:CFTC Approves LedgerX, LLC to Clear Fully-Collateralized Futures and Options on Futures. U.S. Commodity Futures Trading Commission.
  4. LedgerX announces the launch of exchange listed bitcoin mini futures. Medium.
  5. CFTC Grants SEF Registration to LedgerX LLC. CFTC.
  6. CFTC Grants DCO Registration to LedgerX LLC. CFTC.
  7. CFTC Grants DCO Registration to LedgerX LLC. CFTC.
  8. Order of Designation. CFTC.
  9. LedgerX Announces Change to Executive Leadership. PR Newswire.
  10. LedgerX Co-Founder Returns to Lead Company's New Strategy. PR Newswire.
  11. LedgerX Board Member Says Company in Disarray After Founders’ Ouster. CoinDesk.
  12. Board member alleges LedgerX chaos as company announces $4M in new financing. The Block Crypto.
  13. Press Release:CFTC Approves LedgerX, LLC to Clear Fully-Collateralized Futures and Options on Futures. U.S. Commodity Futures Trading Commission.
  14. LedgerPrime Raises $12 Million for Crypto Quant Trading. CoinDesk.
  15. Website. LedgerPrime.
  16. BitVol, a “VIX-Like” Volatility Index for Bitcoin, Makes Its First Trade. John Lothian News.
  17. VIX-Like Gauge for Bitcoin Sees Its First-Ever Options Trade. Bloomberg.
  18. Data. LedgerX.
  19. Rules. LedgerX.
  20. Commission Regulation 40.2(a) – Certification of USDBTC Prepaid Day-Ahead Mini Swaps LedgerX LLC Submission No. 19-26. LedgerX.
  21. LedgerX Announces Change to Executive Leadership. PR Newswire.
  22. Amid Bitcoin Uncertainty, ‘the Smart Money Knows That Crypto Is Not Ready’. New York Times.
  23. LedgerX Reveals Bid to Beat Bakkt to Physical Bitcoin Futures Launch. CoinDesk.
  24. Introducing Omni — Powered by LedgerX. LedgerX.
  25. Order of Designation. CFTC.
  26. CFTC Approves LedgerX to Settle Futures in Real Bitcoin. CoinDesk.
  27. Beating Bakkt, LedgerX Is First to Launch ‘Physical’ Bitcoin Futures in US. CoinDesk.
  28. What is going on at LedgerX?. John Lothian News.
  29. What Happened: Why the First Physical Bitcoin Futures Haven’t Launched. CoinDesk.
  30. Press Release:CFTC Approves LedgerX, LLC to Clear Fully-Collateralized Futures and Options on Futures. U.S. Commodity Futures Trading Commission.
  31. LedgerX announces the launch of exchange listed bitcoin mini futures. Medium.
  32. LedgerX is ready to launch options for ether. The Block.
  33. LedgerX Unveils Betting Market for 2020’s Bitcoin Block Reward Halving. CoinDesk.
  34. A Bitcoin Halvening Is Two Years Away -- Here's What'll Happen To The Bitcoin Price. Forbes.
  35. LedgerX Launches ‘Bitcoin Fear Index’ to Track Price Volatility. CoinDesk.
  36. LedgerX is taking another shot at a bitcoin fear gauge. The Block Crypto.