ErisX launches physically-settled ETH futures contracts

Crypto derivatives platform ErisX has expanded its physically-settled futures products to include Ether (ETH) for U.S. clients. The announcement comes less than a week after the exchange’s clearinghouse, referred to as Eris Clearing, secured a Bitlicense from the New York State Department of Financial Services (NYDFS), so it could offer trading services to N.Y. residents. These ETH futures are currently available for trading with monthly and quarterly expirations.

ErisX already offers physically-settle Bitcoin futures, which it launched last December. But CoinDesk notes that the demand for these contracts is limited. It’s competitor, Bakkt, however, saw a spike in the amount of Bitcoin delivered to traders to start the year, according to Arcane Research.

Why it matters:

• As opposed to cash-settled futures, physically-settled contracts consist of buyers taking the delivery of the asset (in this case, either BTC or ETH) and paying the sellers the futures price specified in the contract. Since the seller has to transfer the bitcoin to the buyer upon settlement, there’s no need to worry about calculating an accurate spot price when the contract expires. Therefore, physically-settled futures could offer a more reliable and robust alternative for hedging or speculation.
• ErisX says these are the first Ether futures offered in the U.S. Most have speculated the hesitation from derivatives platforms was due to lingering regulatory concerns as to how regulators would view these contracts. There have been multiple reports within the last year stating that CFTC officials consider ETH to be a commodity and are ready to approve Ether futures, which opened the gates for ErisX to get the approval. One point of consideration, however, is that CFTC Chairman Heath Tarbert previously hinted the agency is debating whether Proof-of-Stake (PoS) tokens classify as securities. While a decision in the short term remains unlikely, any debates on this topic could complicate exchange products like futures contracts as Ethereum transitions to a PoS network.