FTX CEO Faces Numerous Futures Industry Insiders at CFTC Roundtable

FTX CEO Sam Bankman-Fried talked a lot about disintermediation during a CFTC roundtable on Wednesday. He answered questions from 31 industry professionals about the FTX.US application, which provides clearing of margin products, including cryptocurrency-based products, without a futures commission merchant (FCM) intermediary.

Many participants felt the need to mention their commitment to innovation and declared that they did not see the proposed new technology as an "us vs them" situation. Only six to eight clearinghouses currently dominate the market, so new competition won’t emerge, said Joe Cisewski of Pantera Capital. Like many in the room, he believed that this new trading model needed more of a regulatory framework.

“We don’t know what a cryptocurrency margin is,” said American University law professor Hilary Allen. Allison Lurton of the Futures Industry Association (FIA) emphasized that because of the "central position" of merchants in the system, FCM regulations are prescriptive rather than principle-based, and that many rules and regulations will have to be tailored to the proposed disintermediation trading system. revised.

“We don’t really know what retail traders in the crypto space are going to engineer in the market,” said Coinbase’s Christine Parker. Commenting on the firm’s experience outside the U.S., Parker said crypto trading doesn’t follow the mold of traditional commodities. She is one of several people who believe that overseas options trading is superior to US options.

Some also pointed to ways in which the current system deliberately differs from the automated solution proposed by FTX. Lurton et al. point out that a framework for 24-hour clearing already exists, but there are reasons not to use it. The proposed trading algorithm has to deal with the unexpected, Allen said, noting:

"That's not what algorithms do, […] that's what regulators do."

Todd Phillips of the Center for American Progress suggested that the CFTC's role is to ensure that investment products are suitable for consumers. Potential 24/7 liquidation “is not something we would like retail investors to participate in,” he said. Bankman-Fried frowned on the suggestion, calling it arrogance and saying that "many people know more than anyone in this room" about margin trading.

"I'm looking forward to something more contentious," Chicago Fed chair Robert Steigerwald said later in the six-and-a-half-hour meeting.