FTX US Derivatives (Formerly LedgerX)

What Is FTX US Derivatives (Formerly LedgerX)?

FTX US Derivatives (formerly LedgerX) is a digital currency futures and options exchange and clearinghouse. It is regulated by the Commodity Futures Trading Commission (CFTC) and can be used by retail and institutional investors.

The exchange offers physical settlements of all contracts, block trading, and algorithmic trading opportunities for institutional investors; it also allows direct access for all traders. You can trade 24 hours a day, seven days a week on the exchange.

Key Takeaways

  • FTX US Derivatives (formerly LedgerX) is a regulated platform for trading Bitcoin and Ether derivatives such as futures, options, and swaps.
  • All of its contracts are physically settled rather than cash-settled.
  • FTX US Derivatives (formerly LedgerX) also acts as a clearinghouse for institutional investors who negotiate cryptocurrency block trades directly with one another.

Understanding FTX US Derivatives (Formerly LedgerX)

FTX US Derivatives (formerly LedgerX) was the first exchange to offer cryptocurrency contracts in the U.S. Contracts for bitcoin, called mini-contracts, sold in increments of 0.01 BTC; ether contracts are called deci-contracts and sold in increments of 0.10 ETH. These fractional contracts enable you to make granular trades and allow for scalability as the markets fluctuate.

FTX US Derivatives is registered with the CFTC as a Designated Contract Market, Derivatives Clearing Organization, and a Swap Execution Facility.

In October 2021, FTX US acquired LedgerX, which changed its name to FTX US Derivatives. FTX US Derivatives offers cryptocurrency futures, options, and swaps—all of which are physically delivered instead of cash-settled.

In a physically-settled contract, the underlying asset (in this case cryptocurrency) is delivered upon expiration in exchange for U.S. dollars. Since launching in 2017, the company has cleared millions of derivatives contracts.

The CFTC approved LedgerX (now FTX US Derivatives) for futures trading in September 2020.

Futures Trading

Like a regular futures contract, the company's cryptocurrency futures contracts obligate you to buy or sell at a predetermined price and time in the future. Contract sizes depend upon the cryptocurrency and move in $1 increments. FTX US Derivatives offers contracts for the current and following month and two quarterly settlements.

The contracts are European-style options, which can only be exercised on the expiration date. You're required to submit instructions to exercise your options because contracts are not automatically exercised for you.

Swaps

The swap contracts from FTX US Derivatives give you an inexpensive way to buy or sell cryptocurrency. Swap contracts are priced at $0.05 each. If you're selling, you receive cash immediately—if you're buying, you'll receive your cryptocurrency by 4:00 p.m. ET.

All futures and swap contracts are fully collateralized. For instance, if you're selling Bitcoin futures, you must have bitcoins in your account. If you're buying Bitcoin futures, you must have the cash available in your account. If you want to use call and put options, you're required to post the premium related to those options.

A service for institutional investors allows for the direct negotiation of block trades, with FTX US Derivatives acting as the clearinghouse.

Currently, FTX US Derivatives does not support spread or margin trading.

Special Considerations

Companies like FTX US Derivatives provide a level of transparency, predictability, and safety for futures and options contracts that is unavailable in options offered through non-clearinghouses. They allow you to buy or sell cryptocurrency puts and calls, which may help reduce the wild fluctuations in cryptocurrency values by enabling you to hedge against the extremes.

To be successful, FTX US Derivatives needs to attract high contract volumes to make investors believe that cryptocurrency derivatives are viable investments. This is similar to exchanges where cryptocurrencies are sold. Established exchanges such as Coinbase benefit from a virtuous cycle, in which their popularity draws in more investors and increases trading volumes.

Does FTX US Have Derivatives?

Because FTX US acquired LedgerX in October 2021, it offers cryptocurrency derivatives on the FTX US Derivatives trading platform.

Is FTX Allowed in the U.S.?

FTX US is allowed to conduct business within the U.S., but its products are limited. FTX US Derivatives allows you to trade cryptocurrency futures contracts and options in the U.S.

Does Cryptocurrency Have Derivatives?

FTX US Derivatives is an exchange and clearinghouse for cryptocurrency futures and options.

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author does not own Bitcoin.

Article Sources
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  1. LedgerX. "About Us."

  2. FTX US Derivatives. "FAQ: Ledgerx Is Now FTX US Derivatives."

  3. Commodity Futures Trading Commission. "CFTC Approves LedgerX, LLC to Clear Fully-Collateralized Futures and Options on Futures."

  4. LedgerX. "Futures."

  5. LedgerX. "Options."

  6. LedgerX. "Swaps."

  7. LedgerX. "What Products Can I Trade on LedgerX?"

  8. LedgerX. "Institutional."

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