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Meet LedgerX: the CFTC's New Google Owned, GS Run Exchange

Just Who Owns Ledger X?

All your transactions belong to us. Create, approve, outlaw outsiders. Do it under the guise of the investor's protection. CFTC dong the work of the people

LedgerX Paul Chou Career Timeline

Goldman Sachs > LedgerX > Advisor to CFTC on Blockchain > LedgerX  Approved by CFTC

As Zerohedge caught on Saturday:

US regulators aren’t yetcomfortable with bitcoin ETFs (although aquad-levered S&P ETF is just fine for mom and pop), but apparently options and swaps are another story.
This week, the CFTC took a bold step forward in terms of granting institutional investors access to the bitcoin market, approving the creation of the first SEF or Swap Execution Facility. Previously, traders who wished to place bets in bitcoin derivatives markets were forced to operate in markets that were strictly OTC. But now the agency has issued a registration order to LedgerX, granting it status with the CFTC as a Swap Execution Facility, in the process approving bitcoin options trading.

Who is LedgerX?

They are owned by Miami International Holdings Inc. which is an options and stock trading platform. They are a Delaware LLC operating out of Princeton NJ. and fronted by attorneys.

According to crytoninjas:

Back in May, Ledger Holdings, the parent company of LedgerX, closed $ 11.4 Million in Series B financing. Led by Miami International Holdings Inc. (MIH) and Huiyin Blockchain Venture Investments, this funding will go to support LedgerX’s plan to develop its regulated exchange and clearing house for bitcoin and other digital currencies.

On December 16, 2016, Ledger Holdings and Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX Options Exchange, jointly announced that MIH had completed an investment in Ledger Holdings. Early investors in Ledger Holdings include Google Ventures and Lightspeed Venture Partners.

The executives of MIH are attorneys. Lawyers are commonly used to front and hide business  interests of people who wish to remain out of the public eye. That in itself  is no indictment. But it is worth knowing WHO the CFTC is giving permission to, don't you think? 

Here is what I found on Bloomberg's Business description here about MIH's execs. 

We've purposely left in the hyperlinks Bloomberg has for their names. Which, as it were, lead to an error page. SHOCKING! The money behind Miami Options is probably a client of Gallagher's firm right?

In case Bloomberg changes the link: Here is a pic for Gallagher and Schafer's bios and their board associations

Here  is the website of the parent company of LedgerX:  www.miaxoptions.com for info on its executives.

LedgerX own site  is legit. The point here is not that anyone is doing anything illicit. The point to be made is that LedgerX  has Goldman Sachs operational fingerprints all over this and is in part owned by Google Ventures.  And good for them. We do not know who their investors are. But assume it is Miami Options real owners. And who owns Miami Options? Not Morgan Stanley. Do you think MS would let GS people run its investment? 

Nope- our money is on GS as an indirect investor owning a  "Call" on  control if needed.

 

Quid Pro Quo et Quo et Quo........

Do you think Ledger X's principals owe anything to their investors other than a return on their money? Any firm that has Goldman Sachs, Google ( and other firms that do this) as its owner /investor gets more than money. They get influence. That comes in the form of PAC, friends in regulatory places, order flow etc.

And that means  that businesses like GS, Google etc, that are vertically integrated may expect preferred treatment down the road. Marketmaker status, clearing preference etc. 

Or as is most common in deals like  this, the Venture Cap investor can buy out the successful project at a predetermined price.

Example would be: 

  • Quid: Money, influence, joint back office resources, client flow,  investment recommendations and referrals
  • Pro Quo: a non-controlling stake of 20%... AND we own a call to buy the whole  thing out at a price  of $10MM that expires in 5 years.

This is fair. And it is how GS and other smart firms seed industries. They, like GV have money in several seeded firms in the same areas they wish to get into. Whoever gets there first gets the payout.

The potential problem is in that the "rich get richer" axiom that these firms have protective moats via legislation already in place with which to blanket their new ventures and thus  protect them from unconnected competition. Hyman Roth would be proud, no?

Who is the problem? The government is. GS is  doing what we'd have done at one  point in our careers. Goldman is genius because they know Google adn other firms like Aamzon will obviate the needs of their services. So they are joining up while they still have clout. And in this way, they will be partnered wiht their replacement technologically (Blockchain) and market structure-wise (Google)

LedgerX: a DE LLC, doing business in NYC, owned by a company named Miami Holdings which is in Princeton NJ.

Are You Not Pleased?

The government is stupid, manipulated, and incapable of protecting us if it wanted to. But as tempting as it is to blame the system as a Noam Chomsky would do, we feel that is a resignation and acceptance of things.

We prefer  to say we are biding our time. We recognize and accept, but will not rest until that which exists is altered to be more beneficial to the common investor, middle class, and the voting citizenry.

We are in the camp that it's the people, not the system that can effect change. Philosophically we believe in free will and prefer James over Hegel. Either the people ( all of us) must change and awaken from our candy crush slumber, or the people in Gov't must be changed.

When the last ember of hope that internal change is possible; only after every person we elect promises that change  and falls short either because he cannot overcome the incumbent bureaucracy or because  he is  all to enthralled and consumed by it; only then will change really come. That change will be from the outside, from the grass roots.

The system was created by man. Man must change the system bottom up when the other options are exhausted. 

Until then, we suck it up and deal, sadly

 

U.S. CFTC Approves Blockchain Startup LedgerX As Cryptocurrency Swap Execution Facility

Via  Lester Coleman for Cryptonews

The U.S. Commodity Futures Trading Commission (CFTC) has granted LedgerX LLC registration as a swap execution facility (SEF), making it the first federally regulated SEF allowed to offer clearing services and a trading facility for options based on digital currency for the institutional market.

LedgerX plans to list and clear fully collateralized, physically settled options on bitcoin and other cryptocurrencies. SEFs operate under the CFTC’s regulatory oversight for the trading of swaps.

Following a review of the LedgerX application, the CFTC determined that LedgerX complied with the necessary regulations.

Regulations To Follow

LedgerX also must not list an intended-to-be-cleared swap until it has a clearing agreement with a registered derivative clearing organization, according to the CFTC. LedgerX also must not list a swap not intended to be cleared until it submits revisions of its rulebook and other pertinent materials to provide for the execution of uncleared swaps.

There now are 25 SEFs registered with the CFTC.

Also read: CFTC to discuss blockchain for derivatives, taps LedgerX’s Chou as advisor

LedgerX Receives Investment

LedgerX received an investment from Miami International Holdings Inc. (MIH) in December. MIH invested in LedgerX’s parent company, Ledger Holdings, and received a 10-year, exclusive global right to license equity or fixed income products related to digital currencies developed by LedgerX and to develop its own equity or fixed income derivatives based on such LedgerX products to be listed on MIAX Options and MIAX PEARL, MIH’s second options exchange.

The CFTC previously appointed Paul L. Chou, CEO and founder of LedgerX, as a bitcoin trading expert to its technical advisory committee. The committee advises the CFTC on the impact of technology innovations for the securities market and financial services, along with the regulatory and legislative response to the growing use of technology in the markets. Committee members include representatives of financial intermediaries, traders, futures exchanges, self-regulatory organizations and market participants.

The CFTC officially recognized bitcoin as a commodity in September of 2015 when it took an enforcement action against a bitcoin operator for being unlicensed. That action marked the most significant bitcoin regulatory move in the U.S., along with the New York State BitLicense, also enacted in 2015.

Featured image from Shutterstock.