CryptoClearing

This article details a particularly contentious brawl between several panelists about the future of crypto:

https://www.bloomberg.com/news/articles/2018-05-02/a-verbal-cryptobrawl-breaks-out-at-milken-over-bitcoin-s-future

The following two quotes struck me as interesting, and worth some comment given my perspective on this area:

“Mashinsky said crypto assets will let people bypass banks.

 

‘You’re just making stuff up,’ Roubini replied.”

In fact, he’s not — Mashinsky is right, and LedgerX is seeing it all the time.

One of the most amazing use cases of crypto that we’ve seen play out is as a form of collateral, pledged in order to do trading in BTC derivatives. We have a ton of customers who pledge only BTC, use our day ahead swaps to convert a portion into USD, trade all manners of derivatives, and when they are done, they convert all the holdings into BTC and have us send it back to them on the blockchain.

It’s extraordinary that people can send us millions worth of BTC on a Saturday night, have it available within hours to support complex trading strategies, and when they are done have it sent back as BTC. They haven’t touched the banking system once throughout the entire process, something which I think is unique in the history of US federally regulated derivatives exchanges and clearing houses.

So go ahead — bypass the banks. It’s a real thing.

The post CryptoClearing appeared first on LedgerX.

source https://ledgerx.com/cryptoclearing/

Zero Sum, an Announcement, and a Correction

When I was a trader at Goldman, it constantly bothered me that the trading mentality was too oriented around the zero sum idea — for one person to win, another has to lose. That’s a horrible way to go about things and also happens to be entirely inaccurate.

Zero sum is a matter of scope. If you scope the game to an individual trade, there is no question that it’s zero sum. One person gains money, the other loses it. But that’s an entirely unrealistic economic scoping of what is actually happening.

If Bill Gates sells some Microsoft shares to a retiree, and the shares go up, the cynic will say that Gates lost and the retiree investor won. But of course that is nothing close to the richness of what is happening in an interaction like that — what is each person doing with the trade, after? If Gates took the proceeds of that trade to invest in another even higher yielding project, such as a new company, or to invest in projects to control Malaria, he could very well be earning a higher return on his proceeds than he would have had with holding his stock. Also, the retiree wins as well. Positive sum.

Bitcoin is a new ecosystem, and derivatives on Bitcoin can be considered some of the most zero sum transactions in the world. But we certainly don’t see it that way — for example, miners who work with us, selling call options and investing the proceeds in projects to advance the state of the art in hardware, mean that both buyer and seller can benefit.

So with that in mind, LedgerPrime (our affiliated market maker) is open sourcing their basic codebase for quoting options algorithmically. I have a lot of friends who are curious as to how these algos work, and I can say with certainty that it’s a ton of fun algorithmically trading options. But it’s also nontrivial to build from scratch. It’s easily an order of magnitude more complex than trading spot, and we want to make it as accessible as possible to those interested, because we think at this stage in the market, there is room for a lot of participants who can all do well.

You can find the initial repo here: https://github.com/LedgerPrime/ledgerx and there will be more installments coming. Of course, there are no promisees of quality and effectiveness, it’s just a good starting point for those who might be interested. We hope you find it helpful.

Correction

One of my obnoxiously smart friends from college rightfully pointed out an error in this post: https://ledgerx.com/is-btc-real/

BTC does not have to use the real number system to achieve the aspects I was describing. It only has to be a quotient of two integers, so real numbers are overkill. Instead, BTC needs only to be in the rational number subset of the reals.

So it turns out Bitcoin doesn’t need to be real, it just needs to be rational.

(Thanks Boris A. for the feedback)

— Paul

The post Zero Sum, an Announcement, and a Correction appeared first on LedgerX.

source https://ledgerx.com/zero-sum-announcement-correction/

LedgerX files updated fee schedule with the CFTC

On February 13, 2018, LedgerX filed the following updated fee schedule to the CFTC.

VIA COMMISSION PORTAL

Christopher J. Kirkpatrick
Secretary, Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, D.C. 20581

Re: Commission Regulation 40.6(a) – Rule Certification
LedgerX LLC Submission No. 18-05

Dear Mr. Kirkpatrick:

LedgerX LLC (“LedgerX”) hereby submits to the Commodity Futures Trading Commission (the “Commission”), pursuant to Section 5c(c) of the Commodity Exchange Act (the “CEA”) and Commission Regulation 40.6(a), an updated Fee Schedule (“Amendment”). The attached Amendment will become effective on February 28, 2018.

Various fees have been revised for early 2018. The changes being made are marked on a copy of the Amendment, which is attached hereto as Appendix A. This Amendment also includes revised fee amounts for the recently self-certified USDBTC day-ahead options contract.

LedgerX believes that the Amendment is consistent with the SEF Core Principles, because the Amendment (i) sets forth fees that are equitable, are very reasonable given bitcoin’s price history, and do not unfairly discriminate and (ii) sets forth the manner in which LedgerX will assess its fees in a clear and transparent way.

LedgerX certifies that the changes amendments comply with the CEA and Commission Regulations thereunder. LedgerX additionally certifies that it has concurrently posted a copy of this submission letter and the attachments hereto on LedgerX’s website at https://ledgerx.com/. LedgerX is not aware of any substantive opposing views to the Amendment.

Please contact the undersigned at (917) 935-6727 or alex@ledgerx.com if you have any questions or you would otherwise like to discuss this further.
Sincerely,

Alex C. Levine
Chief Compliance Officer
LedgerX LLC

* * * *

LedgerX Fee Schedule
(as submitted February 13, 2018)

Fees for Weekly and Monthly Options

1. For each transaction executed on LedgerX, each Participant to the transaction will be charged an execution fee that is equal to $12.50 per contract.

2. For each contract that results in settlement and delivery, the Participant exercising the option will be charged $0.25 per contract that is exercised.

Fees for Day-Ahead Swaps

1. For each transaction executed on LedgerX, each Participant to the transaction will be charged an execution fee that is equal to $3.00 per contract.

Fees for Day-Ahead Options

1. For each transaction executed on LedgerX, each Participant to the transaction will be charged an execution fee that is equal to $5.00 per contract.

General Fees

1. A USD withdrawal fee of $10 will be charged to the Participant per USD withdrawal.

2. A BTC withdrawal fee of 0.005 BTC will be charged to the Participant per BTC withdrawal.

3. Per-transaction fees charged by swap data repositories will be charged to the Participant. Liquidity Providers approved by LedgerX to participate in
LedgerX liquidity programs may be offered fee reductions as part of the program. No such programs are currently in place.

PLEASE NOTE: For the current fee schedule, please reference https://docs.ledgerx.com/docs/fee-schedule

The post LedgerX files updated fee schedule with the CFTC appeared first on LedgerX.

source https://ledgerx.com/updated-fee-schedule/

A brief overview of custody for bitcoin and other digital assets

As some of you may already know, my name is Bryan Bishop. Some of you know me from the community of Bitcoin Core contributors, but I am also the digital assets bitcoin expert at LedgerX. I would like to offer some current perspective on methods for the storage and custody of bitcoin and other digital assets. The perspective from LedgerX tends to be somewhat unique.

source https://ledgerx.com/digital-assets-overview/

Bubble, Rubble, Same old Trouble

It surprises my friends when I tell them that my wife (also co-founder / president) and I do not own any bitcoin. Zero. We did this years ago to ensure that we were objective and committed to running LedgerX, and not like, sitting on an island somewhere and leaving our investors out to dry. Because […]

source https://ledgerx.com/bubble-rubble-same-old-trouble/

The easy way and the right way

Yesterday was a good illustration of the problems someone has to solve before cash-settled bitcoin futures work. Bitcoin showed a little volatility: a 12% percent rise followed by an 18% percent drop over a total of fifteen hours. (This happens many times each year.) Simultaneously, both of the largest U.S.-based spot exchanges went down for […]

source https://ledgerx.com/the-easy-way-and-the-right-way/

Time to Make the Leap

Leaps (options with an expiration of one year or longer) are some of the most interesting financial instruments. They give a market driven view of risk far beyond something that would expire in a week, let alone what’s gleaned in a spot transaction. LedgerX is excited to announce to the ecosystem that this morning we […]

source https://ledgerx.com/time-to-make-the-leap/