CFTC Cites TeraExchange for Early Bitcoin Swaps Violation

The order cites the venue's mischaracterization of pre-arranged offsetting trades, known as wash sales, made in October of last year as part of its initial rollout, which the CFTC said were in violation of the Commodity Exchange Act's (CEA's) SEF trading rules.

"Subsequent to the transactions, Tera issued a press release and made statements at a meeting of the CFTC’s Global Markets Advisory Committee (GMAC) announcing the transactions, creating the impression of actual trading interest in the Bitcoin swap," the Commission said in a release. "Neither Tera’s press release nor the statements at the GMAC meeting indicated that the October 8 transactions were pre-arranged wash sales executed for the purpose of testing Tera’s systems."

Despite being the first order of its kind for a SEF, the result does not include a financial penalty.

Earlier this month the CFTC established Bitcoin as a regulated commodity coming under its enforcement authority with another order, this time against an options contracts venue owned by CoinFlip.

The CFTC's newly-active posture in the space adds to an already arduous path to navigate for aspiring Bitcoin derivatives venues, as Waters reported in an in-depth feature earlier this year.

Meanwhile, the distributed ledgers underlying the virtual currency — known as blockchains — continue to gain in popularity as the sell side explores their potential application.