FTX Seeks CFTC Approval on Derivatives Proposal

FTX’s plan could change how the derivatives markets operate

article-image

Commodity Futures Trading Commission | Source: Shutterstock

share

key takeaways

  • FTX proposes to let individual investors post margins directly instead of going through a broker
  • CFTC is currently considering FTX’s proposal and evaluating public comments

Cryptocurrency exchange FTX is looking to get Commodity Futures Trading Commission (CFTC)’s approval to allow individual investors to use derivatives to place leveraged bets on bitcoin, the Wall Street Journal first reported on Wednesday. 

The regulators are currently considering the proposal and could make a decision later this year. If approved, it would mean that investors could deal directly with the cryptocurrency exchange led by Sam Bankman-Fried rather than going through a broker, which could fundamentally change the way the derivatives markets infrastructure and operate. 

FTX’s proposal has sparked opposition from competitors and Wall Street firms alike. Terrence Duffy, CEO of Chicago Mercantile Exchange (CME), said the move would create “market risk” during a US Congressional hearing in May. The CME offers a bitcoin derivative product that is designed to compete with FTX’s offerings. 

In March, the CFTC opened up a public comment request regarding FTX’s proposal for amended derivatives clearing organization registration, and received comments including concerns over customer protection. 

Dennis Kelleher, co-founder, president and CEO of non-profit organization Better Markets, wrote in a letter that, during the evaluation, the CFTC must ensure “the protection of customers and market participants — and limiting if not reducing systemic risks — remain the paramount concerns.” 

“We believe all investors should have the data, educational tools and a range of financial products available to them so they can make the best decisions possible for themselves,” an FTX spokesperson told Blockworks. 

Chris Bae, CEO of digital asset trading firm Enhanced Digital Group, told Blockworks that it is “inevitable” that more sophisticated trading strategies emerge such as the use of derivatives as the crypto market gets more mature.

“We have seen institutional demand for structured products and derivatives being used to better navigate the current market cycle, so it is only natural the retail market will follow,” he said. 

“Retail investors’ assets deposited on these platforms should absolutely be senior to equity holders by new or old,” Bankman-Fried said in an interview event at Harvard Business School Club of New York last Thursday, referring to his company’s rescue move to crypto lenders BlockFi and Voyager. 

Casey Wagner contributed reporting for this story.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495M in value locked, doubling Uniswap's Base deployment.

article-image

Plus, all the world is green as prices across the crypto space rally, with solana reaching a nearly two-week high

article-image

Investors add to crypto positions after “turnaround in sentiment due to lower-than-expected CPI,” CoinShares research head says

article-image

Plus, Ethereum is in the midst of a vibecession

article-image

Also, former Valkyrie CEO lands new leadership role at Canadian investment firm Cypherpunk Holdings

article-image

This week’s biggest funding round saw Jump Trading, JPMorgan contribute to the round

article-image

Plus, a layer-1 for intellectual property is launching and Farcaster users peaked