This post continues our assessment of whether the Limited Derivatives User requirements of Rule 18f-4(c)(4) effectively and efficiently accomplish the SEC’s aim of providing “an objective standard to identify funds that use derivatives in a limited manner.” Here we question whether the “gross notional amount” of a derivatives transaction measures the

The financial press is awash this morning with reports that the launch of a bitcoin futures exchange-traded fund (a “BTC Futures ETF“) may be imminent.

Before recommending that clients invest directly in bitcoin or in a BTC Futures ETF, a registered investment adviser (RIA) should analyze:
Continue Reading RIAs and Bitcoin Futures ETFs: Forget Not Thy CPO and CTA Analysis

By Keith Miller, Kari Larsen and Sarah Howland

The Commodity Futures Trading Commission (CFTC) Settlements Timeline serves as an interactive compilation of select CFTC guidance, enforcement actions, and speeches relating to the application of the federal securities laws to digital assets. Beginning with the Order filed in September, 2015 by the CFTC requiring Coinflip and

In Episode 4 of our Podcast Series, Todd Zerega and Andrew Cross discuss the use of derivatives on cryptocurrencies by institutional investors. Specific attention is given to regulatory and product development considerations for registered investment advisors and fund sponsors, as well as technical considerations related to exchange-traded futures on bitcoin and other similar listed

Every Friday afternoon the U.S. Commodity Futures Trading Commission (the “CFTC”) publishes its Commitments of Traders Report (“COT Reports”).

As explained at the CFTC’s website, these reports “provide a breakdown of each Tuesday’s open interest for futures and options on futures markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC.”  The data in respect of these Friday afternoon reports is provided to the CFTC by regulated market participants (futures commission merchants, clearing members, and foreign brokers and exchanges) on Wednesday morning of each week, with adjustments to the publication and reporting schedules to account for holidays.
Continue Reading Bitcoin Futures Contracts: A Look at CFTC Reports About the Types and Volume of Trading on U.S. Futures Exchanges

This post builds upon an idea presented in Part 4 of current series of posts on considerations for investment funds and advisers related to cryptocurrency derivatives.

In particular, this post provides additional perspectives on the relationship of leverage, margin, and financing to two commodity interests: “retail commodity transactions” and a “swaps”.  We decided to present these comments separate from the current multi-part series on cryptocurrency derivatives, since the topic may appeal to a broader audience than funds and advisers.

This post was co-authored with Michael Selig, an associate attorney in the New York office of Perkins Coie.


Continue Reading Swaps and Retail Commodity Transactions (Leverage, Margin or Financing: Will We Know It When We See It or Only After It Has Been Identified As Such?)

It was a busy morning at the intersection of derivatives and virtual currencies.  Here is an overview of what happened and some thoughts about what it means for the world of virtual currencies.
Continue Reading CBOE and CME Self-Certify Bitcoin Futures, Cantor Self-Certifies Bitcoin Binary Options and NFA Issues Investor Alert

On June 2nd, the U.S. Commodity Futures Trading Commission (the “CFTC”) announced an enforcement order and settlement with BFXNA Inc. d/b/a Bitfinex, an online platform for exchanging and trading cryptocurrencies (the “Platform”).  This posting will summarize that order with the goal of helping our readers make sense of the current state of the law with respect to the CFTC’s regulation of bitcoin and other cryptocurrencies.
Continue Reading Making Sense of the CFTC’s Enforcement Order and Settlement with Bitfinex

On September 24th, the U.S. Commodity Futures Trading Commission (CFTC) settled charges against TeraExchange LLC, a provisionally registered bitcoin swap execution facility (SEF).  The charges stem from a non-deliverable forward (“NDF”) contract based on the relative value of the U.S. Dollar and Bitcoin (the Bitcoin swap) executed over that SEF.

Background: Forwards and NDFs

A forward contract is an agreement between one party (the “Buyer”) and another party (the “Seller”) whereby the Buyer agrees to purchase something in the future from the Seller for a price that is agreed to
Continue Reading 3…The Number of Weeks in a Row for Bitcoin Related CFTC Guidance…CFTC Settles With Bitcoin SEF Over Wash Sales / Prearranged Trading

On September 17th, the Commodity Futures Trading Commission (“CFTC”) announced an enforcement order and settlement against an unregistered bitcoin options trading platform. The order is notable for six reasons:

1) It is the first official pronouncement from the CFTC that, “Bitcoin and other virtual currencies are encompassed in the definition [of a commodity under the Commodity Exchange Act] and properly defined as commodities”.  This is significant since
Continue Reading CFTC Brings First Enforcement Action Against Unregistered Bitcoin Options Trading Platform