FTX’s head of US regulatory strategy says that the Commodity Futures and Trading Commission (CFTC) has shown openness about the FTX proposal to provide direct access to trade bitcoin (BTC-USD) and Etherium (ETH-USD) on margin without intermediaries.
The commission is part of the national governance structure and is dedicated to preventing manipulation and abuse of the futures and derivatives market.
“At first, there might have been some amount of skepticism, [but] by the end of the discussion, there seemed to be a considerable amount of openness to what we’re trying to do,” Mark Wetjen, head of policy and regulatory strategy at FTX US and former CFTC commissioner, said. Wetjen was referencing a public roundtable the CFTC held in May on FTX’s proposal.
“I think there’s generally high level of interest and intrigue in our proposal by the CFTC,” Wetjen said. “We believe that… the proposal actually addresses a lot of interesting different issues that the CFTC has dealt with for some amount of time.”
What is interesting about FTX’s proposal?
The exchange proposed an automated collateral system which would require customers to deposit collateral and have enough funds to cover automatically calculated margin requirements. If margins fall too low, an automated process to sell the investment will begin.
While the new system tries to address the speed mismatch for crypto derivatives versus the current clearing house model, some fear it could increase pressure from sellers in times of market downturn.
Wetjen says the automatic de-risking mitigation feature is already in use on the FTX.com exchange site, and if approved by the CFTC would require participants even more initial margin from participants before they could trade. Less than 1 percent of overall transaction data on the FTX trading platform comes from the automatic investment drawdown to meet margin calls.
“It’s a risk reducing feature and this is one of the reasons why we think the agency should be excited about this, because our model requires all the customer collateral to be on the platform at all times,” he said.
Meanwhile, Wetjen says he expects increased federal oversight of crypto markets, which will create more clarity and attract more investors to crypto by suppressing volatility.
“As soon as that happens, there’s going to be much more clarity for the investor… the institutional investor is going to become more and more comfortable stepping into the space. All of that is going to lead to a significant maturing process for the industry,” Wetjen said.