By MICHAEL J. CASEY CONNECT Updated Sept. 12, 2014 2:06 p.m. ET
A bitcoin derivatives exchange announced that its trading platform had received approval from the Commodity Futures Trading Commission on Friday, paving the way for new tools with which investors and other market participants can hedge risks and take bets in the fledgling digital currency.
Summit, N.J.-based TeraExchange, which in March organized a groundbreaking swap contract for a bitcoin-based purchase of a rare Stradivarius violin, said it worked closely with the CFTC to obtain approval for its platform, where investors can list and trade dollar-denominated bitcoin currency swaps. Such swaps, which in the case of TeraExchange’s bitcoin swaps will range from one day to two-year maturities, are bilateral contracts under which one counterparty must make a payment to the other upon the swap’s expiry, depending on whether the price of the underlying asset exceeds or stays below an agreed-upon threshold. TeraExchange’s bitcoin swap contracts themselves are still pending approval by the CFTC.