Crypto exchange FTX proposes to fulfill customers’ crypto derivatives trades without involving exchanges, banks and financial intermediaries. Companies in the financial sector are apprehensive that if this proposal is approved by the regulators, then this model may be applicable for other assets as well.
The plan of FTX describes using algorithms instead of brokers to clear trades. Clearing trades is an important process to ensure the seller gets his funds and the buyer gets the assets he has bought on his behalf. David Weisberger, who built trading systems for Morgan Stanley and now runs crypto firm CoinRoutes, said: “This may be the first major shift in structure from the general market in years. Change causes stress.” Those opposing FTX’s plan say that it will affect the protection for investors. This can take away the work of brokers and there is a risk of loss to the market. However, there is a huge fear that this could give FTX a chance to dominate markets ranging from oil to gold.
One given to Bloomberg Television Interview When asked about this plan in the U.S., FTX co-founder and CEO Sam Bankman Fried said that FTX Retail crypto related to trades. However, this proposal can be used for multiple asset classes. If this model of FTX is used for assets other than crypto, it could harm derivatives marketplace CME, Intercontinental Exchange, a company of the New York Stock Exchange, other exchanges and banks clearing trades on these platforms.
Last year, CME’s revenue from trading and clearing futures trade was $3.8 billion and Intercontinental Exchange’s $2.4 billion, according to data from Bloomberg. There are also some supporters of this proposal of FTX. Nasdaq Inc. Executive Vice President of India Tal Cohen called it a big step. SkyBridge Capital founder Anthony Scaramucci said the plan to eliminate middlemen will benefit investors by reducing costs and making the market more efficient.