Bakkt has officially revealed the initial deposits its customers will have to make to margin trade its bitcoin futures products.
In a new notice posted Tuesday, ICE Futures U.S. – the actual futures exchange Bakkt’s contracts are trading on – announced the initial hedge and speculative requirements for customers, as well as its monthly rate add-ons.
John Todaro, director of research at TradeBlock, told CoinDesk that the initial margin requirements are “the amount of assets (collateral) that need to be pledged in order to open a position.”
According to Tuesday’s notice, customers will have a $3,900 deposit requirement for both Bakkt’s daily and monthly futures contracts as an initial hedge. The speculative initial requirements will be somewhat higher, at $4,290 each.
The initial hedge requirements are for accounts which already have exposure to bitcoin, Todaro said, adding:
“Speculative requirements are for those accounts that are speculating on the price move on bitcoin through futures contracts. The CFTC and other regulating agencies have rules in place to protect futures markets from excessive speculation, which can lead to deviant price fluctuations, volatility, etc.”
Add-ons
Similarly to the initial hedge and speculation rates, Bakkt’s inter-month add-ons differ.
Both the monthly and daily futures contracts will have a $400-$1,000 hedge rate, but the speculative rate will fluctuate from $440-$1,100.
A footnote clarifies that the margin rate will vary depending on the expiration date and the “difference in expiration dates of contracts.”
“As contracts trade over time, there then becomes a maintenance requirement in order to keep your position open,” Todaro said. “Depending on market movements, this position may require you to allocate more funds to return the initial margin required.”
The notice also included an inter-commodity spread credit percentage rate, which Todaro explained relates to the credit “available for offsetting positions in related instruments.”
With bitcoin currently trading around $10,000, Tuesday’s notice matches the predicted margin rates detailed in a FAQ Bakkt published last month, which noted that the initial margin was “expected to be approximately 37 [percent] for outright contracts.”
While the FAQ said the spread was expected to range from $400 to $800, it did note that the “ICUS risk department reserves the right to adjust the margin level based on market conditions.”
Upcoming launch
The notice comes less than two weeks before Bakkt is expected to launch its highly-anticipated futures contracts on Sept. 23.
When Bakkt was first announced in August 2018, the company said it would not support margin trading. However, the warehouse seemingly moved away from this position when it announced its September launch date last month.
Bakkt CEO Kelly Loeffler previously told CoinDesk that Bakkt’s daily contract would be margined.
At the time, Loeffler did not say how much leverage would be available for the contracts.
The company’s warehouse, which will actually hold customers’ bitcoin, began accepting customer deposits on Sept. 6. The company has declined to share how much it has received to date or the wallet address for its holdings.
Tuesday’s notice noted that the margin requirements were “tentative.”
UPDATE (Sept. 10, 2019, 18:20 UTC): This article has been updated with additional comment.
Kelly Loeffler image via CoinDesk archives
https://www.coindesk.com/bakkt-to-require-3900-down-payment-on-bitcoin-futures-contracts
