The Commodity Futures Trading Commission, or CFTC, recently approved a license modification for ErisX’s clearing house. The license amendment allows ErisX freedom to offer more trading products.
“The significance of the Amended Order is that it expands our licensed activities allowing us to clear products on other commodities beyond just virtual currencies or crypto,” ErisX general counsel Laurian Cristea told.
“Now we may list futures or swaps across the commodities spectrum from new crypto related contracts such as hash rate futures or crypto indices, to event contracts, and contracts on other commodities including, for example, tokenized base metals, precious metals, and diamonds.”
The ErisX brand includes an exchange hosting spot and futures trading, as well as a clearing entity, which also facilitates spot and futures activities, Cristea clarified. “On the Federal level, our exchange holds a Designated Contract Market (DCM) license, and our clearing house holds a Derivatives Clearing Organization (DCO) license,” he explained.
Unlike the crypto space, which sees exchanges wearing a number of hats, regulation requires mainstream traditional finance to segregate different wings of an enterprise. Exchanges provide market availability, while clearing houses handle the assets and their settlements on the back end.
Regulation requires separate entities for derivatives product trading and clearing. The same is not true of spot trading, although ErisX uses this structure anyway, due to its benefits, which include greater asset protection, according to Cristea.
The CFTC amendment not only adds mainstream market commodity clearing ability, but also gives ErisX an advantage. “Our clearinghouse platform, composed of our TCS technology and DCO license, now possesses several important distinctions and capabilities not featured with all DCOs,” ErisX CEO Thomas Chippas said in a public press statement on Wednesday.
“We can clear fully-collateralized futures and swaps related to cryptocurrencies as well as contracts on all other commodities. We look forward to further welcoming FCMs, Institutions, Market Makers, Professional Trading Firms and Individuals to benefit from the expanding services of our clearinghouse.”
The achievement also opens ErisX’s clearing entity up to work with other companies and entities. “ErisX’s integrated exchange and clearing technology platform, licenses and operations enable us to offer services to 3rd parties that have innovative commercial ideas that require regulated market infrastructure,” the statement said.
Regulation has only become more central to the crypto industry in recent years, with compliance becoming imperative.
Also read: Russia’s central bank says the pandemic has accelerated regulators’ interest in CBDCs