Traders who are involved in the bitcoin market are now getting the ability to collateralize their derivatives trades.
TeraExchange has announced that it has partnered with BitGo, a bitcoin security platform, to provide multi-signature blockchain based custodial services for USD/Bitcoin swaps executed on its swap execution facility. By partnering with BitGo, TeraExchange now offers traders the ability to collateralize bitcoin derivative trades in a completely secure and auditable trading environment.
TeraExchange is a swap execution facility (SEF) that is registered with the Commodity Futures Trading Commission and provides market participants with access to bitcoin swaps, interest rate swaps, credit default swaps and non-deliverable forwards.
The TeraExchange institutional trading platform will use bitcoin’s cryptographic ledger system – known as the blockchain – combined with BitGo’s multi-sig security platform to replace the physical third-party custodianship model required of traditional collateral depositaries.
“The relationship with BitGo fills in the missing piece of the bitcoin derivatives trading workflow,” said Leonard Nuara, president and co-founder of TeraExchange. “Participants can now trade with the confidence of knowing that the required collateral is in place which serves to create a safe and sound marketplace.”
In September, TeraExchange became the first regulated platform for bitcoin derivatives and a spot Bitcoin price index. Trading of USD/Bitcoin swaps is subject to the rules and regulations of TeraExchange and the CFTC. TeraExchange also operates the Tera Bitcoin Price Index, which employs a dynamic algorithm that compiles and filters data on a real-time basis from a number of widely utilized global bitcoin exchanges.
Participants on TeraExchange must maintain a BitGo Enterprise account and establish a multi-sig, custodial wallet. BitGo’s platform ensures that deposited bitcoins as collateral for the USD/Bitcoin swaps are securely held on the blockchain and transactions sent from the enterprise wallet require BitGo’s multi-signature approval process. This approach establishes auditable bitcoin collateral, creating a complete electronic trading lifecycle for bitcoin derivatives trading.
TeraExchange and BitGo have already enrolled several firms in this new system, including DigitalBTC and Ribbit.me.
