FTX Makes Major Acquisition
Takeaways
- FTX acquires LedgerX, a regulated digital currency futures & options exchange and clearinghouse
- Aims to bring crypto Bitcoin and Ethereum futures and options to its U.S. customers
- A key step in bringing crypto in line with the regulatory regime
- LedgerX is part of the CFTC (Commodity Futures Trading Commission)
- LedgerX is the first US Approved Crypto Derivatives Platform
FTX, the crypto trading giant, who just struck another deal to slap their name on a major stadium, this time the Cal Bears college program, has acquired a regulated futures and options exchange and clearinghouse, Ledger X. This is a giant step towards compliance with full regulated entities like LedgerX who “maintain a Derivatives Clearing Organization (DCO) license issued by the U.S. Commodity Futures Trading Commission (CFTC).” This authorizes LedgerX to clear fully collateralized futures, options on futures, and swaps.
Speaking on the deal, President of FTX.US Brett Harrison said: “This acquisition marks a significant milestone for our rapidly growing US business and is a key part of our strategy to bring regulated crypto derivatives to our US user base. We believe the integration of our technological capabilities, product portfolio, and large balance sheet with LedgerX will enhance our ability to provide innovative products to all US cryptocurrency traders.”
Derivatives trading can amplify an already massive crypto trading market. Many days, they drive more volume than spot exchange trading. For example, on July 19th, Binance “recorded $42 billion of derivative volume, more than four times the activity in spot trades, Coinmarketcap data shows.” With this acquisition, FTX is setting itself up to be a primary competitor to Binance, which has a large derivatives trading market.
Harrison of FTX spoke on the importance of regulatory compliance, saying FTX looks forward to working with regulators to ensure compliance and says it is “incumbent upon the industry to be proactive and to seek out working relationships with regulatory groups like the CFTC.” Being under the umbrella of the CFTC is not a bad thing, as they “monitor the trading market for unfair practices like fraud, market manipulation, and other illegal activities.”
LedgerX is available to retail and institutional investors and offers physical settlements for all their contracts. Since their launch in 2017, they have cleared more than 10 million crypto options and swap contracts and “pioneered the bitcoin mini contracts that enable granular trading.” The CEO of LedgerX said of the deal: “US crypto derivatives is an incredibly underserved market, and it took time and resources for us to become a regulated entity under the existing frameworks. FTX.US has taken the view, which we share, that US regulators are ready and willing to partner on innovative products.”
This is a relatively big deal, as this is the first-ever US-approved crypto derivatives trading platform. Also, it signals that US regulators are no longer an adversary to the crypto industry, but a willing partner. As we have reported before, many experts believe it has become far too big to ignore. This deal is a sign of things to come, as it opens up the floodgates to more traditional, managed capital ready to dive into crypto. Usually, crypto derivates trading has been done by retail folk, but it seems institutions are primed to jump in now, FTX looks to provide solutions for both. This deal is yet another first step in the crypto industry to bring institutional compliance which will of course bring institutional adoption.
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