ICE’s Crypto Trading Platform Will Not Support Margin Trading

Announcements, News | August 21, 2018 By:

Bakkt, a new digital assets platform recently unveiled by the Intercontinental Exchange (ICE), will not support margin trading for its bitcoin contract, according to CEO Kelly Loeffler.

Earlier this month, ICE, the parent company of the New York Stock Exchange (NYSE), introduced Bakkt to bring digital assets to the mainstream and help unlock the potential of the technology. Bakkt is working with BCG, Microsoft, Starbucks, and others to create a “seamless” global ecosystem for cryptocurrencies that would cover the spectrum from federally regulated markets and warehousing to merchant and consumer needs. Once approved by the US Commodities and Futures Trading Commission (CFTC), Bakkt plans to offer a one-day physically delivered bitcoin contract by November.

In a recent Medium post, Loeffler said that Bakkt will be setting new standards for crypto exchanges, including a consistent regulatory construct, an institutional quality pre- and post-trade infrastructure, and transparent, efficient price discovery.

Price discovery refers to the act of determining the proper price of a security, commodity, or good or service by studying market supply and demand and other factors associated with transactions. Because cryptocurrencies are traded on different exchanges, meaning different price discovery markets, there is often price discrepancies across exchanges.

Loeffler said the physical delivery of cryptocurrencies is “a critical element” to trusted price formation, which is a fundamental part of advancing the promise of digital currencies.

“Specifically, with our solution, the buying and selling of bitcoin is fully collateralized or pre-funded,” Loeffler said. “As such, our new daily bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset. This supports market integrity and differentiates our effort from existing futures and crypto exchanges which allow for margin, leverage and cash settlement. Coupled with a secure, regulated warehouse solution, you can begin to see how this market infrastructure can help more institutions and consumers participate in the asset class.”