Crypto Billionaire's Derivative Plan Raises Hackles
FTX has proposed to execute every aspect of customers crypto derivatives trades on its own
At a posh financial-industry gathering known for swaying palm trees and late-night yacht parties, this year's main attraction was a face-off between a crypto billionaire and a futures-exchange kingpin.
There was Sam Bankman-Fried, whose FTX platform has rapidly become a dominant venue for investing in virtual coins, going toe-to-toe with Terry Duffy, the longtime chief executive officer of CME Group Inc. at the event in Florida. Among the topics broached in their intense conversation was an FTX proposal to execute every aspect of customers' crypto derivatives trades on its own -- thus bypassing other exchanges, banks and financial intermediaries.
If FTX's bid is approved by regulators, many in traditional finance fear the model could be applied to other assets, threatening Wall Street's stranglehold over lucrative aspects of market plumbing. The centerpiece of FTX's plan is using algorithms rather than brokers to help clear trades, a crucial process for settling transactions that ensures sellers get their funds and buyers get the assets they've purchased.
“It's the first real constructive disruption to traditional market structure that we've seen in awhile,” said David Weisberger, who earlier in his career built trading systems for Morgan Stanley and Two Sigma and now runs crypto company CoinRoutes. “All change creates tension.”
Opponents say FTX's plan would undermine investor protections, could cost brokers their jobs by cutting them out of trades and risks disrupting markets that are functioning well. But a bigger concern is that the proposal, which is being reviewed by the Commodity Futures Trading Commission, could give FTX a
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