Today, FTX’s US-based crypto exchange announced the acquisition of LedgerX, a crypto derivatives trading platform regulated by the Commodity Futures Trading Commission (CFTC).
The terms of the transaction, which is expected to close in October 2021, have not been disclosed, and it will have no effect on LedgerX’s operations because the exchange will continue to provide its current offerings to its existing customer base.
FTX.US will be able to offer Bitcoin and Ethereum options and futures contracts to retail and institutional traders if the acquisition is completed, leveraging LedgerX’s relationships with the CTFC.
Many of FTX’s financial products, including derivatives, are currently unavailable to US investors.
“This is probably one of the most exciting announcements we’ve ever had,” said FTX founder and CEO Bankman-Fried of the deal.
Crypto derivatives, such as Bitcoin futures, enable investors to buy or sell assets at a predetermined price without physically holding the underlying asset. They allow investors to bet on the prices of cryptocurrencies while also hedging against the volatility of the assets.
Other popular crypto derivatives include options and perpetual contracts, which allow investors to buy or sell an asset at a predetermined price on a predetermined date.
FTX.US president Brett Harrison confirmed to us earlier this month that the exchange was working on adding crypto derivatives trading to its platform and was considering two options: applying for its own license or acquiring another business that already has such a license.
FTX.US currently only supports spot trading for a limited number of cryptocurrencies, including Bitcoin, Ether, Litecoin, and Tether (USDT).
Concentrate on regulatory compliance.
FTX.US emphasized that it will “dedicate significant resources to developing a strong working relationship with the US regulatory community, specifically with the CFTC,” with the ultimate goal of meeting “the rigorous standards of the US financial services industry.”
“Common ground between regulators and industry is the foundation of safe, long-term innovation,” Bankman-Fried added.
Last week, the CFTC moved to clarify its regulatory role in the United States, emphasizing that it only monitors commodities-based instruments such as futures, swaps, and other derivatives. For example, the agency stated that it will not regulate commodities traded on cash markets, such as natural gas, but it will regulate derivatives based on these commodities.
FTX.US is currently the sixth-largest crypto exchange offering spot trading in the United States. According to CoinGecko, it has a 24-hour volume of just under $400 million, trailing such heavyweights as Coinbase and Kraken, which have $5.9 billion and $1.5 billion, respectively.
Binance.US, Binance.com’s US affiliate, is third in terms of daily trading volumes, with $1.2 billion.
FTX.US, on the other hand, will almost certainly anticipate an increase in overall trading volumes once the exchange is able to open derivatives trades. Currently, the Chicago Mercantile Exchange (CME) is the only regulated venue in the United States that offers Bitcoin and Ethereum futures and options.