Binomial Exchange, a U.S.-regulated crypto derivatives exchange, has officially filed with the Commodity Futures Trading Commission (CFTC) to launch XRP Futures Contracts, which will lead to XRP Spot ETF Launs.
This move, while significant on its own, represents an essential first step toward the potential launch of a spot XRP ETF. The development comes a year after Judge Analisa Torres ruled that XRP is not a security and less than a week after the final ruling in the Ripple v. SEC case.
Overview of Bitnomial’s XRP Futures Contracts
Bitnomial submitted the filing to the CFTC on Aug. 9, two days after the SEC lawsuit’s end, self-certifying its intention to list contracts of XRP Futures on the U.S. Dollar (XUS). Per the filing, the exchange plans to offer these contracts for trading starting Aug. 13, 2024.
XRP Futures will be physically settled, margined contracts based on the value of 100,000 XRP, with the contracts traded and settled in US dollars. These contracts will adhere to various core principles set by the CFTC, including ensuring transparency and the protection of market participants.
The filing also provides a detailed overview of the current state of the XRP market. Notably, XRP, the native token of the XRP Ledger, has a circulating supply of about 60.86 billion tokens from a maximum supply of 100 billion tokens. Of the remaining tokens, 39.1 billion XRP are in Ripple’s escrow.
XRP is currently one of the most liquid digital assets, ranking eighth in terms of 24-hour trading volume among all cryptocurrencies. In a historical snapshot, Bitnomial Exchange showed that the average monthly trading volume for the XRP-USD pair stands at over 85 billion XRP.
Futures Contract Specifications and Position Limits
Notably, the XRP Futures Contracts from Bitnomial come with specific safeguards to prevent market manipulation and ensure orderly trading.
The exchange has proposed a monthly position limit of 300 million XRP, equivalent to 3,000 XRP futures contracts. This position limit is roughly equivalent to the amount of XRP that Ripple releases from its monthly escrow—a detail that has significant implications for the market.
Interestingly, attorney Bill Morgan, reacting to Bitnomial’s filing, pointed out that the 300 million XRP position limit mirrors the amount Ripple typically uses from its monthly escrow releases.
It is interesting to consider some information disclosed by Bitnomial in its submission to the CFTC for certification of its listing of XUS (XRP USD Futures).
On average the monthly XRP trade is over 85 billion on XRP cash markets.
Bitnomial proposesa spot month position limit… pic.twitter.com/uEwJak0zlA
— bill morgan (@Belisarius2020) August 14, 2024
Morgan argues that this fact will help to counter the ongoing “Ripple dumps FUD” narrative, which claims that Ripple’s escrow releases contribute to XRP’s underperformance in the market.
Bitnomial’s filing also outlines the exchange’s compliance with several core principles required by the CFTC. These principles ensure that the XRP Futures Contracts are not easily manipulated and that they adhere to strict market conduct rules.
The exchange has taken measures to prevent market disruption, including setting position limits, monitoring trading practices, and enforcing disciplinary procedures.
Broader Implications for a Spot XRP ETF
While Bitnomial’s filing does not directly indicate the launch of a spot XRP ETF, it is a critical step in that direction. The U.S. Securities and Exchange Commission (SEC) typically looks for the existence of futures contracts before approving spot ETF applications.
As a result, the successful launch and operation of XRP Futures Contracts could lay the groundwork for future ETF issuers to explore launching an XRP spot ETF. Industry leaders such as Ripple CEO Brad Garlinghouse have expressed confidence in the eventual launch of a spot XRP ETF.
Bitnomial’s move aligns with the broader trend of increasing institutional interest in cryptocurrency assets. Last December, Bitnomial procured a U.S. clearinghouse license, making it the first-ever American crypto firm to secure a complete set of broker, derivatives exchange, and clearinghouse licenses.
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