September 24, 2022

Goldman Sachs Eyeing Crypto Derivatives Market with FTX

According to reports, one of the top investment banks in the US is looking to expand its derivatives’ offering. Goldman Sachs appears to be interested in onboarding these products into the crypto derivatives’ offerings of the FTX US crypto exchange. Recent reports showed that the investment bank has been in talks with the crypto exchange over help with public listing and regulation. This is because it wants to offer its clients crypto derivatives and in order to accomplish this goal, Goldman Sachs will leverage some of its own services and tools. FTX US is the subsidiary of global crypto exchange FTX in the United States.

The exchange has been making efforts to offer brokerage services to people for its crypto derivatives offerings. If the exchange is successful in doing so, it would be able to deal with the margin and collateral requirements on its own. This would eliminate the exchange’s dependence on Futures Commission Merchants (FCM) for this purpose, which it has to do for now. Brett Harrison, the president of FTX US said that they were working with several FCMs and this included some large and renowned names. The crypto exchange had been asked to provide public comments by the Commodity Futures and Trading Commission (CFTC) in the US.

It is the regulatory authority in the United States and is of the opinion that the proposal put forth by the FTX US exchange requires further scrutiny because it could enable large investment banks, such as Goldman Sachs, to establish a monopoly in the market. Those who were familiar with the FTX and Goldman Sachs integration disclosed that the derivatives service of the investment bank would be able to directly offer trading futures. It would also be able to introduce its clients to the exchange and act as an on-ramp.

Furthermore, it will also have the opportunity of providing its clients with capital top-ups. According to FTX, they would be able to create a free and stable market through this integrated brokerage platform. Sam Bankman-Fried, the chief executive of the FTX exchange, had a discussion with the CFTC recently. He answered a number of questions that the regulatory body had about crypto derivatives and also elaborated on its proposal of creating an FCM of its own. The trading of crypto derivatives has been a controversial topic for quite a while and crypto exchanges in the United States and some European countries are not permitted to offer leveraged trading services.

As a matter of fact, some of the countries in Europe forced the world’s leading crypto exchange Binance to shut down its derivatives offerings altogether. The amendment that FTX is demanding has driven the CFTC to call for greater scrutiny of their proposal. Meanwhile, FTX claims that introducing the integrated brokerage they are suggesting would mean that the exchange would not have to wait for the next day to liquidate any positions, as every 30 seconds it would calculate the margin requirements on its own.

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