FTX to Offer Derivatives Trading to US Customers Through the Acquisition of CFTC-Regulated Exchange
The US is a “huge untapped opportunity.” By combining the forces with the regulated LedgerX that offers futures, options, and swaps on Bitcoin and Ether, FTX.US wants to build the “best-in-class derivatives exchange in the U.S.”
FTX.US, the American affiliate of the global cryptocurrency exchange FTX, has announced the acquisition of the parent company of LedgerX for an undisclosed sum.
LedgerX is a Commodity and Futures Trading Association (CFTC)-regulated crypto derivatives exchange that offers futures, options, and swaps on Bitcoin and Ether. FTX CEO Sam Bankman-Fried said on Tuesday.
“We're excited to work with the CFTC on innovating in the US crypto derivatives space in a regulated, understood manor(sic). Common ground between regulators and industry is the foundation of safe, sustainable innovation.”
In a recent interview with Insider as well, Bankman-Fried emphasized taking regulation “extremely seriously” and that it's his biggest focus as the goal is to be “allies rather than enemies of regulators.”
“I just wish that the industry were, as a whole, doing a more conscientious job of interfacing with regulators,” he said, adding that players in the crypto space need to be “responsible and show that they don't need to have overly paternalistic regulations.”
With the US crypto derivatives market being a “huge untapped opportunity,” both the exchanges want to combine the forces to build the “best-in-class derivatives exchange in the U.S.”
Derivatives Market A Natural Extension
Unlike FTX.US, FTX International already offers derivatives trading and records a $500 billion monthly volume.
With this acquisition, the deal for which can close as early as October, FTX.US will offer the functionality to US-base users, a product line not offered by the exchange’s competitors Coinbase, Gemini, and Kraken.
“We want to plant our flag in something that is uniquely ours,” says Brett Harrison, CEO of FTX.US. “Going into the derivatives market is such a natural extension.”
Much like its global counterpart, FTX.US is also growing fast, managing $350 million in spot volume per day, up from just $1 million in January this year. Still, the exchange has a long way to go, with Coinbase recording $4.6 billion in daily volume, Kraken just over $1 bln, and even Binance.US is managing to have $1 bln in volume.
As for regulated derivatives trading in the US, CME is the major player, currently handling $1.82 bln in open interest on Bitcoin futures and $770 mln on Ether futures.
According to Harrison, FTX.US and LedgerX have similar profiles mainly geared towards institutional clients, with retail only making 30%. But LedgerX does target retail with its small contracts such as bitcoin mini representing 0.01 BTC.
FTX.US’s focus, however, is institutions such as hedge funds and proprietary trading firms, as they don’t want to promote a ‘gamified’ experience. Harrison said,
“It is important to make it clear from the beginning that this is a trading platform…it's not a game with which to risk everything. And that's not our goal. We want people to trade safely and responsibly.”