(Bloomberg) — Crypto trading giant FTX’s U.S. unit wants to begin clearing leveraged derivatives trades for mom-and-pop investors.
The exchange doesn’t use intermediary brokerages as most firms do to limit the impact from any possible defaults. Now, FTX’s LedgerX, the division that’s registered with the U.S. Commodity Futures Trading Commission, is seeking permission from the regulator to apply its “non-intermediated” clearing model to retail trading in margined products.
The CFTC is seeking public comment on the plan until April 11.
FTX’s plan for clearing trades represents a departure from how a majority of firms registered with the agency handle the transactions. Those companies use a model that relies on brokerage intermediaries to deal with margined-product trades, which involve collecting some money from clients ahead of time to cover possible losses if bets go sideways.
According to the CFTC, FTX would still require initial margin from clients and then also a maintenance deposit. Under its model, the firm would recalculate margin levels every 30 seconds, and if the collateral on deposit falls below the maintenance-margin level, the automated system could start to liquidate positions. FTX, according to the CFTC, also intends to have agreements with outside firms to backstop losses and would itself guarantee losses with $250 million of its own capital.
Zach Dexter, the head of FTX unit, said that the company’s proposed model would provide more transparency and help reduce risk.
Today “there’s no real-time measure of how much risk exists in the financial system,” he said on Twitter on Thursday. “The intermediated nature of the traditional financial system makes this hard.”
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