The US Commodity Futures Trading Commission has approved a subsidiary of blockchain infrastructure company tZERO to operate a regulated derivatives exchange, giving the company a new route into the US derivatives market.
The approval, granted on November 10, allows tZERO DCM, LLC, a wholly owned subsidiary of tZERO Group, to operate as a Designated Contract Market. The CFTC’s official register now lists the subsidiary as a designated exchange.
The approval completes a two-part regulatory process for tZERO. In October, the regulator registered another subsidiary, tZERO DCO, LLC, as a Derivatives Clearing Organisation, authorising it to provide clearing services for derivatives transactions. Together, the two registrations give tZERO the regulatory foundation to operate both an exchange and a clearinghouse for derivatives trading.
What the approval means for tZERO
A Designated Contract Market is a CFTC-regulated exchange where eligible derivatives products can be listed and traded. These products can include futures and options, as well as other contracts that meet regulatory requirements.
A Derivatives Clearing Organisation, meanwhile, handles the clearing and settlement of derivatives trades. It also manages counterparty risks, helping ensure that parties fulfil their obligations under a contract.
With both registrations, tZERO can develop infrastructure that supports the trading and clearing of derivatives for financial institutions and other market participants.
The company says its new capabilities could support products such as event contracts, tokenised derivatives, conventional derivatives and perpetual futures. However, individual products will still need to meet applicable regulatory requirements and receive any necessary approvals before they can be offered.
tZERO expands its blockchain infrastructure business
The approval builds on tZERO’s existing business in regulated securities infrastructure, including broker-dealer services, alternative trading systems, digital asset securities custody, transfer agency, clearing and settlement.
The company operates an Infrastructure-as-a-Service model, providing financial institutions and other partners with technology and regulated services they can use to offer financial products to their own customers.
By adding derivatives exchange and clearing capabilities, tZERO aims to expand this model beyond securities and tokenised assets.
CEO Alan Konevsky described the two approvals as a major milestone for the company, saying they would create new opportunities to provide independent trading and clearing infrastructure to market participants. The latest approval also satisfies the first earn-out milestone under tZERO’s proposed merger agreement with FG Imperii Acquisition Corp., according to the company.
However, regulatory registration does not mean the exchange is already offering live derivatives products. tZERO will still need to develop its services, establish operational arrangements and meet the requirements applicable to each product it intends to list. The approval gives the company the regulatory foundation to move into derivatives trading and clearing, adding another layer to the infrastructure supporting traditional and digital financial markets.
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