Discussions Heating Up at the CFTC Roundtable
During an intense roundtable session at the United States Commodity Futures Trading Commission (CFTC), FTX CEO Sam Bankman-Fried engaged with a packed room filled with 31 industry professionals. The hot topic? The FTX.US application to offer clearing of margined products, particularly those based on crypto, without the need for a futures commission merchant (FCM) intermediary. Talk about diving into the deep end!
The Innovation Vs. Tradition Debate
Participants came prepared to emphasize their passion for innovation. “This isn’t ‘us versus them’,” declared Joe Cisewski of Pantera Capital, pointing out how just six or eight firms currently dominate the U.S. clearing market. New competition, he argued, wouldn’t just ruffle feathers—it’s essential!
What’s a Crypto Margin, Anyway?
The confusion about definitions had some in the room scratching their heads. Hilary Allen, a law professor at American University, was blunt: “We don’t know what a crypto margin is.” The punchline? We’re all in this together, yet nobody seems to have the answers!
Overhauling Regulations: A Herculean Task
Allison Lurton from the Futures Industry Association (FIA) voiced concerns that current FCM regulations are rigidly prescriptive instead of following a principles-based approach. Revising many rules for non-intermediated trading could be like trying to fit an octagon in a square hole.
Retail Traders and Global Perspectives
As the session progressed, Christine Parker from Coinbase pointed out that we still don’t fully understand what a retail trader in the crypto space would design in a market. Based on her experiences outside the U.S., she views international trading options as superior. Looks like the grass isn’t just greener—it’s multi-colored!
The Current System: The Good, The Bad, and The Automated
Still, several participants pinpointed how today’s system deviates from the automated solutions proposed by FTX. Lurton highlighted that the framework for 24-hour clearing is there, yet it’s seldom utilized. The listed algorithms would need to demonstrate their capabilities in responding to unexpected situations, further complicating matters. As Allen pointed out, algorithms won’t step in when the going gets tough—“that’s what regulators are for.”
What’s at Stake for Consumers?
Todd Phillips of the Center for American Progress raised a valid concern: “The CFTC’s role is to ensure investment products are suitable for consumers.” He suggested that round-the-clock clearing might not be the safest path for retail investors. Yet, Bankman-Fried wasn’t having it and fired back, claiming the notion was condescending. “A lot of people know more than those in this room about margined trading,” he stated defiantly.
A Long Roundtable with Surprising Outcomes
As the six-and-a-half-hour session drew to a close, moderator Robert Steigerwald of the Federal Reserve Bank of Chicago expressed disbelief, remarking, “I was expecting something far more contentious.” Perhaps the real contention lies just beneath the surface as the debate around the future of trading heats up!
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