Today France-based LCH SA announced it will provide central clearing services for Bitcoin index futures and options traded on GFO-X, a UK-regulated digital asset exchange. It expects to start in Q4 2023, subject to regulatory approval. LCH is the world’s largest derivatives clearing house and a subsidiary of the London Stock Exchange.
The derivatives will be cash settled. LCH says it is fully segregating LCH DigitalAssetClear, including a separate default fund.
‘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.
Central clearing houses such as LCH help to mitigate risks by managing collateral and supporting multilateral netting. Ironically, FTX’s Sam Bankman-Fried lobbied the U.S. derivatives regulators CFTC, wanting to remove the separation of clearing, enabling it to settle directly and manage collateral internally.
GFO-X has raised £16 million ($20 million) in funding, and the company is controlled by its CEO Arnab Sen and COO Rajesh Melwani, who worked together at Hong Kong’s Harbour Capital Management. Investors include Sweden’s byWit and Hong Kong’s Mount Parker Ventures.
Meanwhile, the industry derivatives body ISDA has released standard definitions for digital asset derivatives. It also published a whitepaper for what happens in the event of bankruptcy.
