Goldman Sachs and FTX Plan Integration to Improve Crypto Derivatives Trading
Trading Crypto Derivatives!
Crypto derivatives primarily refer to secondary contracts or financial tools that derive their value from a primary underlying asset. The main asset could be any cryptocurrency such as Bitcoin. Let’s deeply understand crypto derivatives trading and its difference from crypto trading with an example.
Suppose there is an investor who invests in Bitcoin. The investor can earn money from the investment only when the bitcoin price exceeds the price at which he first bought the bitcoin. If the price falls below the purchase price, the investor will suffer a loss. But when it comes to crypto derivatives trading, trading allows investors to trade contracts or commodities related to a primary asset and the value of that trade is decided by calculating the value of the primary asset. In this type of trading, investors do not actually own bitcoins but trade the derivatives related to bitcoins.
Goldman Sachs integration with FTX for Crypto Derivative Trading.
There are rumors that Goldman Sachs is in talks with FTX (the largest cryptocurrency exchange in the world) to facilitate crypto derivatives trading. Goldman Sachs plans to offer crypto derivatives trading by leveraging some of its own derivatives tools and services.
FTX US, a subsidiary of FTX is already in action offering brokerage services for its derivatives. This type of offering will eventually help FTX manage collateral and marginal requirements internally without relying on “future commissionaires”.
The CFTC backlash.
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The US Commodity Futures Trading Commission (CFTC) is not in favor of the integration as it believes that FTX having an internal body to support crypto derivatives requirements will ensure that the power is in the hands of a few. one and results in a monopoly. domination.
Arguing the CFTC’s comments, FTX said an in-house brokerage model would help the crypto market be more stable and freer. There have been different views from different reviews on in-house brokerage for trading crypto derivatives.
On one side of the coin, the CFTC warns that having an in-house brokerage system could lead to monopolistic market dominance. While on the other side of the coin, FTX argues that the internal brokerage system will actually benefit the market and make the market more stable and efficient.
Whether the CFTC is specific in its warning or whether FTX’s internal brokerage system will stabilize the market, only time will tell!