According to Barrons, Goldman Sachs and FTX are discussing how they can add derivatives to their operations. Information in the report indicates that GS wants FTX to integrate specific aspects of the derivative business. These aspects include new clients, ability to trade futures directly, capital top-up facilities and being an on-ramp to exchange.
FTX is a crypto exchange that is growing at a fast pace across the globe and has operations in the US as well. But FTX wants to do more than just crypto trading and bought a derivates exchange regulated by the US. This was a recent acquisition, and the firm is also looking at ways to modify its current business license. If it can get the license modified, it will be a hybrid business – an exchange as well as a brokerage firm. This will help it to act as a facilitator of leveraged traded of derivative trades between different parties. The CFTC or Commodity Futures Trading Commission has to grant this modification.
As part of the background process, FTX faces scrutiny from regulators. It will require more than collaborations with giants like Goldman Sachs or other brokerage firms for FTX to become a futures commission merchant. This is because this role is traditionally set out for financial institutions. The modification of FTX’s license is coming from the Futures Industry Association. The reason given by this body is that FTX’s proposal seems to be risk and could result in more financial instability in an already volatile market.
Hearings have already been held in the US Congress and the application is being looked at closely. Hopefully there will be some news on this issue very soon.