Seed CX Begins Testing Swap Contracts Settled in Real Bitcoin

Bitcoin derivatives provider Seed CX has begun testing its margin swaps products with users, the company said Tuesday.

Investors can now onboard to try out Seed CX's swaps product matching platform during the testing period through its subsidiary Seed SEF, a regulated swap execution facility (SEF), the company announced

Seed CX's CEO Edward Woodford told CoinDesk that the testing would allow market participants to test both their connections to the marketplace, as well as the products themselves "to ensure they are working as expected."

"We’re very excited to have begun user testing of our physically-settled bitcoin derivative product," said Seed CX president Brian Liston in a statement. "We’re at the final step."

Woodford told The Block that the company could launch its live swaps product over the next three months.

"The three-month timeline is not firm, as we are waiting on regulatory approval and therefore it is not in our hands to control," he clarified to CoinDesk, adding:

"We are ready from a technology standpoint. The other factors that can influence our timeline is the regulators’ views on these products."

In his statement, Liston said that once testing is concluded successfully and regulators have reviewed, the company "will be able to launch a much needed margined, physically-settled digital asset derivative to U.S. customers."

Race to market

A number of firms are looking to offer physically-settled bitcoin derivatives, in which clients receive the actual bitcoin underlying a contract on expiration, in the U.S. To date, LedgerX is the only one to provide swaps and options products, which it offers to institutional clients, and opened a platform targeting retailers in recent weeks.

However, Seed CX wants to become the first to offer physically-settled products on margin, meaning investors can enter a leveraged position.

The company has previously announced its intention to offer bitcoin forwards, a product similar to the bitcoin futures that Intercontinental Exchange's Bakkt, LedgerX and ErisX are hoping to offer customers. TrueDigital is also looking to launch bitcoin forwards.

While futures are standardized contracts traded on an exchange, forwards can be customized between parties and are traded over-the-counter. Clients can use both to bet on the price of bitcoin at some future date.

According to Tuesday's press release, Seed CX intends to offer nine different contracts simultaneously: four weekly contracts, three serial monthly contracts and two quarterly monthly contracts. Weekly contracts will expire on Fridays, while the monthly and quarterly monthly contracts will expire on the third Friday of the relevant months.

Seed CX, the parent firm to Seed SEF, launched a bitcoin spot trading market in January, offering institutional clients trading and settlement services.

Seed CX office courtesy Seed CX