FTX and Goldman Sachs are allegedly in negotiations about trading derivatives.
According to Barron’s story, Goldman Sachs is in talks with prominent crypto exchange FTX to integrate portions of its derivatives business. Goldman Sachs wants FTX to incorporate various components of their derivatives operations, such as trading futures directly, providing capital top-up, acting as an on-ramp to the exchange, and introducing new clients, according to the report. FTX is one of the world’s fastest-growing crypto exchanges, with a presence in the United States, The US. However, the business recently purchased a US-regulated derivatives exchange in order to expand its offerings outside crypto trading. The company is attempting to amend its license to become a combination of exchange and a brokerage, allowing it to execute leveraged derivatives trading between counterparties. If this occurs, FTX will be permitted to act as a futures commission merchant (FCM), a function that has hitherto been reserved for financial firms such as Goldman Sachs.
Collaborations with Goldman Sachs and Wall Street brokerages will not be enough to turn FTX into an FCM. This proposal has been met with skepticism by regulators, as well as substantial criticism from other quarters. The CFTC has stated that the application needs to be reviewed, and the US Congress has scheduled hearings on the subject. The Futures Industry Association, which represents brokerages and other derivatives-related enterprises, is the most vocal opponent. The group wrote to the CFTC, arguing that the move is dangerous and might exacerbate “financial instability in a time of increased market volatility.” This allegation has been refuted by FTX, which claims that its integrated model would increase market stability.
In recent months, major banks such as Goldman Sachs, Morgan Stanley, and JP Morgan Chase have increased their crypto engagement through a number of projects. Over-the-counter crypto trading is now available thanks to a partnership between Goldman Sachs and Mike Novogratz’s Galaxy Digital. Since last year, it has also traded CME Group Bitcoin products on exchanges. Others, such as Morgan Stanley and JPMorgan Chase, provide exposure to Bitcoin to their clients and have made a number of investments and collaborations in the crypto field.