On April 13, 2023, the London Stock Exchange’s LCH division, a clearing house group servicing major international exchanges and a wide range of over-the-counter (OTC) markets, declared it would provide clearing of digital asset index futures and options contracts traded on GFO-X. Frank Soussan, the business lead at LCH Digital Asset Clear, noted during the announcement that “cryptocurrency derivatives are a rapidly growing asset class.”
LCH SA’s Move to Clear Crypto Derivatives Reflects the Growing Interest Among Institutional Market Participants
A division of the London Stock Exchange (LSE) will offer clearing of digital asset index futures and options contracts, according to a statement from LSE’s clearing house arm, LCH SA. Subject to regulatory approval, the contracts will be sourced from GFO-X and be part of a newly created segregated clearing service called LCH Digital Asset Clear.
Developed by GFO-X and approved by the U.K.’s Financial Conduct Authority (FCA), the crypto contracts will be cash-settled through LCH Digital Asset Clear and rely on metrics from the GFO-X/Coin Metrics Bitcoin Reference Rate (GCBRR). As the world’s largest derivatives clearinghouse, LCH SA’s move to provide clearing of crypto derivatives broadens the firm’s market presence.
Frank Soussan, Head of LCH Digital Asset Clear business, mentioned in a statement that “cryptocurrency derivatives are a rapidly increasing asset class with increasing interest among institutional market participants seeking access within a regulated environment they are familiar with.” He added that “offering centralized clearing for these cash-settled dollar-denominated crypto derivatives contracts on GFO-X is an important development for the market.”
LCH’s entry into crypto-related products occurs as BTC is up 80% since the last day of 2022. Additionally, on April 7, onchain analytics company Glassnode revealed that for the first time, “the amount of open interest in crypto options contracts ($10.3B) has surpassed that held in futures contracts ($10.0B). Futures OI has been relatively flat in 2023. This results from significant call option buys, as investors start to speculate on higher [crypto] prices,” Glassnode explained.
What impact do you think the entry of LCH SA into crypto derivatives clearing will have on the institutional adoption and mainstream acceptance of digital assets? Share your thoughts about this subject in the comments section below.
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