Sam Bankman-Fried, CEO of FTX, spoke a lot at Wednesday’s staff roundtable by the United States Commodity Futures Trading Commission. He answered questions from 31 industry professionals regarding the FTX.US application for clearing margined products without a futures merchant (FCM).
Participants felt the need to express their passion for innovation and stated that they don’t see the new technology as an “us against them” situation. Pantera Capital’s Joe Cisewski stated that the market is dominated by six to eight clearing houses at present so it would be natural for them to introduce new competition. He saw the need to create a more regulatory framework to support this new trading model, just like many others.
Hilary Allen, American University Professor of Law said that “we don’t know” what a crypto margin was. Allison Lurton, Futures Industry Association (FIA), stressed that FCM regulations are prescriptive but not principles-based due to the merchants’ “core situation” in the system. Many rules and regulations will need to be modified for the proposed nonintermediated trading system.
Christine Parker from Coinbase stated, “We don’t really have a clear view of what a retailer trader in crypto space […] would do in a market.” Parker commented on Coinbase’s experience in foreign markets and said that crypto trading doesn’t follow the same patterns as traditional commodities. She was not the only one to consider trading opportunities abroad superior to those in America.
Many others also pointed out how the current system is different from the automated solution FTX proposes. Lurton and others noted that the framework for 24-hour clearing is already in place, but there are still reasons to not use it. Allen stated that the proposed trading algorithm must be able to handle unexpected circumstances.
“That’s not what algorithms do […] regulators are there for.”
Todd Phillips, of the Center for American Progress, suggested that the CFTC’s role is to ensure investment products are suitable for consumers. He stated that possible round-the-clock clearing was not something that retail investors should be able to access. Bankman-Fried reacted with anger to this suggestion, calling it condescending. He said that “a lot more people know more about margined trades than the people in this area”.
Robert Steigerwald, moderator at the Federal Reserve Bank of Chicago, stated later during the six-and a half-hour session: “I was expecting something much more contentious.”