By
Chimamanda U. Martha
May 7th, 2024
The CFTC is looking to discuss and decide on a direct clearing proposal from FTX.US. However, the CME wants to be part of the decision.
The United States Commodity Futures Trading Commission (CFTC) is to hold a roundtable discussion to deliberate on the FTX.US direct clearing proposal . The US arm of the Bahamian crypto exchange previously sent in an application requesting to directly clear its derivatives customers’ trades.
However, Terry Duffy, Chairman of the Chicago Mercantile Exchange (CME), objected to the proposal. In a quarterly earnings call, the chairman explained that the CME should be part of any decision-making process. As Duffy put it:
“The CFTC has to look at new products but you cannot have innovation for the sake of innovation. Innovation has still got to be under the principles-based regulatory regime that is highly outlined by the CFTC today so it will be fascinating to see how this plays out.”
Duffy also stated that changes should not take place without first weighing their potential effect on the economy. He stated this because FTX’s application asked to trade in the derivatives market without an intermediary for clearances.
There is currently no word on when the CFTC will decide on the FTX.US direct clearing proposal.
Public Comments on FTX.US Direct Clearing Proposal
Back in March, the CFTC sought public comments on the FTX.US proposal via public notice. The notice explained that FTX operates a non-intermediated model and clears futures and futures options on a collateralized basis, and is now seeking to alter its order of registration. The CFTC also specified that FTX wants to clear margined products for retail customers without discontinuing its non-intermediated model.
“The CFTC is seeking public comment on FTX’s request, including both on specific questions and policy issues raised by use of a non-intermediated model in this manner.”
In addition, the CFTC also suggested that other entities may have also reached out with proposals similar to FTX.US. As the US derivatives markets regulator put it:
“Recently, however, a number of registered entities have discussed with CFTC staff proposals to offer ‘non-intermediated’ or direct trading and clearing of margined products to retail customers.”
The CFTC is one of the major crypto regulators in the US. Other agencies with oversight over the digital currency market and its derivatives include the Securities and Exchange Commission (SEC) and the US Treasury.
State of US Crypto
The US has been gradually taking meaningful strides towards the all-round embracement of digital currencies. In fact, at the beginning of March this year, President Joe Biden signed an executive order on crypto in the US. Dubbed “Ensuring Responsible Development of Digital Assets,” the order was well-received by both crypto proponents and opponents alike.
Furthermore, crypto-focused platforms are undertaking security measures to ensure a beneficial and supportive crypto trading environment. These include investor protection and anti-money laundering (AML) measures, as well as Know Your Customer (KYC) compliance.
Leading crypto Bitcoin (BTC) is currently trading under $40K due to the general slump of the global crypto marketplace.