CFTC Head Sees FTX’s Idea on Intermediators as a Significant Shift

Established financial institutions have not taken the FTX’s plan to eliminate intermediaries in US crypto derivatives. However, the head of the Commodity Futures Trading Commission (CFTC) has suggested it might be an “evolution” to the functioning of the markets.

CFTC Chairman Rostin Behnam expressed his enthusiasm for the plan at Georgetown University’s Financial Markets Quality Conference on Friday. However, he also added that he could not predict when or in which direction the agency would react.

Behnam said that the intersection of the crypto space and traditional finance is unique. He said, “I think this is potentially, and I emphasize the ‘potential,’ another phase is the evolution of the market, innovation, and disruption.”

FTX’s derivatives business in the US has approached the authority to settle clients’ margin-backed derivatives contracts directly, getting rid of the usual middlemen. Leaders in the derivatives business voiced their opposition to the plan at a roundtable discussion hosted by the CFTC earlier this year, voicing concerns that it might lead to flash crashes due to the automated liquidation of consumers’ holdings.

Behnam argued that transitioning to a “non-intermediated future” would be a “significant deal.” Behram pointed out the parallels between the current transition and floor trading to electronic trading in the commodities market transition in the 1990s.

On Friday, FTX US Derivatives CEO Zach Dexter hinted that the application process is “going well” so far at the Security Traders Association market structure conference. The idea is fixing all of that, according to Dexter. He referred to the FTX’s view that the current market for trading crypto futures is a complex system to deal with for retail investors. His firm is walking the agency through to show the agency how the application works, he added.