London Stock Exchange Group (LSEG) is set to offer digital asset derivatives via a link-up with Global Futures and Options (GFO-X) after the UK said it seeks to regulate — but not stifle — crypto innovation in the region.
The linkup intends to allow LSEG-owned LCH SA — a company providing clearing services for credit default swaps, fixed income, commodities, cash equities and equity derivatives — to offer clearing on cash-settled bitcoin index futures and options, the companies said Thursday.
The clearing house is set to unveil a separate clearing service, called DigitalAssetClear, for cash-settled bitcoin index derivatives traded on GFO-X.
“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,” Frank Soussan, head of LCH DigitalAssetClear, said in a statement.
Notional open interest on crypto derivatives giant Deribit hit a record-high last month.
Arnab Sen, CEO and co-founder of GFO-X, called his company the UK’s first regulated and centrally cleared trading venue focused on digital asset derivatives in a statement. The company is authorized by the UK’s Financial Conduct Authority (FCA).
“Recent market events in the trading of digital assets have highlighted the need for a safe, regulated venue where large financial institutions can trade at scale, while keeping their clients’ assets protected,” Sen added. “LCH delivers proven risk management capabilities across a range of asset classes and some of the most sophisticated clearing services in financial markets today.”
The partnership comes after the UK’s HM Treasury issued a “consultation and call for evidence” related to how to regulate crypto assets in February.
The document mentions the collapse of firms like FTX as having widespread implications for crypto markets and investors.
“Risk taking is a desirable part of the cycle of innovation and we wish to manage, not stifle, this,” it states. “Our view is that this reinforces the case for clear, effective, timely regulation and proactive engagement with industry.”
LSEG bought cloud-based technology provider TORA last year for $325 million, a deal that included an order and execution management system, as well as a portfolio management system, equities, fixed income and digital assets.
The company said in a news release at the time that the addition of digital assets to LSEG’s trading capabilities through the purchase “strengthens its presence in this rapidly expanding asset class.”
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Source: https://blockworks.co/news/clearing-house-bitcoin-index-derivatives