- Goldman Sachs (NYSE:GS) considers the integration of crypto derivation in a deal with FTX.US
- FTX aims to become ‘futures commission merchants’ and handle derivatives in-house.
- US Regulators are highly-skeptical about this deal.
The wall street investment bank Goldman Sachs is planning to venture into crypto derivation in collaboration with the U.S branch of the crypto exchange FTX.
According to a report by the American weekly Barron’s, FTX is seeking a license modification from the Commodity Futures Trading Commission (CFTC). The report, which cited ‘a person familiar with the matter’ further stated that the upgraded license will enable the exchange to act as an intermediary for leveraged derivatives trading.
Goldman and other Wall Street banks are in talks with FTX over leveraged derivatives trading as the crypto exchange moves to shake up the market structure. https://t.co/PN4felqEQy— Barron’s (@barronsonline) May 31, 2022
The exchange aims to become the ‘Futures Commission Merchants’ (FCMs) that will handle all the collaterals and margin requirements internally when lent money is used for trading. Presently, brokerages fulfill this role.
While speaking about the biggest FCMs who are warming to the crypto exchange’s proposal, the President of FTX US arm Brett Harrison mentioned:
We have multiple FCMs already committed to integrating technologically with the exchange… There are several large ones you can probably name.
Harrison believes FTX’s proposal will benefit FCMs. According to him, brokers have been under increased pressure lately from regulations requiring them as intermediaries to post large amounts of capital.
FTX’s integrated model would free up capital for brokerages and could lead to more revenues, Harrison suggested then stated “We’re going to give them a greater chance of having a profitable futures business.”
Of late, crypto derivatives trading has been a trending topic, with several European and American regulators prohibiting most crypto exchanges from offering leveraged trading. The world’s leading crypto exchange Binance had to suspend its derivatives offering in several European countries including Germany, Italy, and the Netherlands, after regulatory interventions.