Goldman Sachs has been in talks with the cryptocurrency exchange FTX about a potential partnership. Goldman’s partnership with FTX will offer several advantages, including direct trading of futures contracts. This also includes introducing clients and its integration roles on the exchange, as well as replenishing capital for clients.
Goldman Sachs plans to integrate derivatives trading with FTX
Sat Bankman Friedfounder and CEO of the cryptocurrency exchange FTXmet David Solomon, CEO of Goldman Sachs (GS)according to Financial Times. Goldman Sachs can work with FTX in an advisory capacity while helping the exchange achieve its IPO goals. This comes as cryptocurrency exchanges expand into traditional finance.
FTX is one of the largest crypto derivatives exchanges, serving US clients through its subsidiary FTX.US. With its ambition to offer crypto and other financial products through a single platform, FTX has been in discussions with the SEC and the CFTC.
In addition, the exchange also wants to manage collateral and margin requirements. These requirements are typically handled by brokerage firms such as Goldman Sachs as a futures broker or FCM. FTX claims that the integrated model increases market stability and frees up capital for brokers acting as FCM.
Find out: The European Union will soon vote on a bill requiring exchanges to report all crypto transactions.
FTX argues that the firm itself holds customer collateral and calculates margin requirements. Therefore, it automatically liquidates positions rather than waiting overnight. These programs have been tested to handle high trading volumes and periods of extreme volatility.
Concerns about the embedded derivatives trading proposal FTX
The CFTC believes that the FTX should be considered as a proposal of the FCM. The proposal was opposed by the US Congress because it threatened the brokerage industry. So even if Goldman Sachs or others integrate certain trading services with FTXit is not clear whether regulators will agree.
Moreover, the Futures Industry Association rejected the proposal FTX. This in claiming that it could increase financial instability and market volatility.
Bonus: The Mirror protocol suffered a serious exploitation posting a loss of approximately 2 million dollars.