TD Ameritrade has expanded its exposure to the cryptocurrency sector following the announcement of an investment in the digital currency exchange, ErisX. Founded in July 2010 to offer cash-settled swap futures, ErisX filed for a Derivatives Clearing Organization (DCO) with the Commodity Futures Trading Commission (CFDC) in 2017. Later that year, the exchange decided to focus on digital assets. According to the ErisX website, the exchange expects DCO approval in Q1 2019 and to launch futures contracts towards the end of 2019.
Amongst the investors to back the DCO and Derivatives Exchange (DCM) were DRW Venture Capital, Valor Equity Partners, Virtu Financial, NEX Opportunities, Cboe Global Markets, CTC Group Investments, Digital Currency Group, Nico Trading, Pantera Capital and Third Stone Partners – alongside well known online broker, TD Ameritrade.
The new market platform will offer a trading facility for a number of cryptocurrencies to include Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH) and Litecoin (LTC). The exchange will facilitate crypto spot contracts as well as supporting clients ability to participate in physically delivered futures. That is to say the underlying crypto asset will be delivered upon the specified delivery date.
This is not TD Ameritrade’s first exposure to cryptocurrency. The brokerage’s 11 million customers can currently trade Bitcoin futures through the Chicago Board Options Exchange (CBOE). This development will make it much easier for retail investors to gain exposure to digital assets. TD Ameritrade’s Managing Director of Futures and Forex, J.B. McKenzie, suggested that it continues to see demand from its retail clients for access to trade digital currency products. He also advanced the idea that this development could open up additional cryptocurrency products in terms of futures and spot contracts to retail clients as it progresses. Additionally, it will be interesting to see if the inclusion of Ethereum, Litecoin and Bitcoin Cash provides them with a market boost – as they have not had the exposure that Bitcoin has had to the Futures market.
In a press release, Tim Hockey – president and CEO of TD Ameritrade – had this to say in relation to its investment:
“As investors in ErisX, as well as a strategic contributor in the initiative, we are looking forward to advancing our innovation goals by working with an established, CFTC-regulated exchange that will include digital asset futures and spot contracts on a single platform. Working with these innovative companies gives us the opportunity to help them develop cryptocurrency products that we believe will fill a gap for retail investors within the digital currency ecosystem.”
Thomas Chippas – former head of global quantitative execution at Citi has joined ErisX as CEO. He becomes one of many executives from the conventional banking and financial sector to make the transition to the growing cryptocurrency space.
Whilst clearly a significant development, it’s interesting to note that it did not create a bullish sentiment in the markets. If anything, many of the leading cryptocurrencies were down slightly. Notwithstanding that, there’s no doubt that this is the latest in a trend we have seen in 2018. This is further evidenced by an announcement on Wednesday by TrueEX that it will launch the first Bitcoin swap contract product shortly. The conventional investment world is integrating crypto into its service offering – making it available to a wider investing public, from retail through to institutional investor.