FTX.US’s effort to get regulatory clearance to directly settle its clients’ derivatives trades requires a response since it will not be the last proposal of its sort, according to the chairman of the Commodity Futures Trading Commission on Thursday.
“There will be more in the future,” CFTC Chairman Rostin Behnam said during a House Agriculture Committee hearing, which supervises his agency. He said the FTX.US Derivatives plan, although innovative, is a natural conclusion of the new technology to “break through some of these walls and have more direct access,” but he hasn’t decided whether to embrace it.
“This concept might result in more effective trade execution and reduced risk in the system,” Behnam said, adding that he is obligated to promote “responsible innovation,” and the notion isn’t necessarily forbidden or in breach of commodities rules. Nonetheless, he thought the subject was important enough to warrant a lengthy public comment period. “We’re treading carefully as we study and contemplate the FTX plan,” he added.
FTX has requested permission for its trading platform to directly settle derivatives backed by margin and FTX.
Earlier this month, US President Brett Harrison stated that “long periods of time between margining periods allow risk to build up in the system, resulting in market volatility,” and that this adjustment will solve that issue.
Harrison, whose company hired former CFTC commissioner and acting chair Mark Wetjen to guide its regulatory goals, stated that CFTC approval would establish FTX as “the first crypto-native exchange capable of offering margined crypto derivatives on an integrated platform with a cryptocurrency spot exchange.”
Behnam said his team would schedule a roundtable on non-intermediated market structure later that month, after the CFTC’s 60-day comment period, which ends May 11. The agency will also have a full slate of commissioners after the Senate approved four nominations to plug holes in the agency’s shorthandedness this week.
The CFTC may ultimately decide to make adjustments to the FTX concept based on internal and external examination, and it will be up to the firm to determine whether such changes are acceptable. Behnam said he didn’t think the FTX clearance would need modifications to current commodity restrictions.
