FTX US to Launch Crypto Derivatives After LedgerX Acquisition

FTX’s U.S.-based crypto exchange announced today that it would acquire LedgerX, a crypto derivatives trading platform regulated by the Commodity Futures Trading Commission (CFTC).

The terms of the deal, which are expected to be completed by October 2021, have not been disclosed, and it will have no impact on LedgerX's operations as the exchange will continue to provide its current offerings to the existing customer base.

Provided the acquisition is closed, FTX.US will have the ability to offer Bitcoin and Ethereum options and futures contracts for retail and institutional traders, leveraging LedgerX’s relationships with the CTFC.

Many of the financial products offered by FTX, including derivatives, currently are not available to U.S. investors.

“This is probably one of the most exciting announcements we've ever had,” Bankman-Fried, the founder and CEO of FTX, commented on the deal.

Crypto derivatives products, such as Bitcoin futures, allow investors to buy or sell assets at a pre-established price without the need to physically hold the underlying asset. They offer investors a way to bet on prices of cryptocurrencies, as well as to hedge against the volatility of the assets.

Other popular crypto derivatives include options and perpetual contracts, which contract that lets investors buy or sell an asset at a predetermined date for a specified price.

In an interview with Decrypt earlier this month, FTX.US president Brett Harrison confirmed that the exchange was working on adding crypto derivatives trading to its platform and considered two avenues to achieve this: either applying for its own license or acquiring another business that already has such a license.

Currently, FTX.US only supports spot trading for selected cryptocurrencies including Bitcoin, Ether, Litecoin, and Tether (USDT).

Focus on regulatory compliance

FTX.US stressed that it will be “devoting significant resources towards developing a strong working relationship with the U.S. regulatory community, specifically with the CFTC,” with the ultimate goal of meeting “the rigorous standards of the U.S. financial services industry.”

“Common ground between regulators and industry is the foundation of safe, sustainable innovation,” added Bankman-Fried.

Last week, the CFTC moved to clarify its regulatory role in the U.S., stressing that it only monitors instruments such as futures, swaps, and other derivatives based on commodities. The agency said that, for example, it won't regulate commodities traded on cash markets, such as natural gas, but it would certainly regulate derivatives based on these commodities.

Within the U.S. market, FTX.US is currently the six-largest crypto exchange offering spot trading. With a 24-hour volume just below $400 million, according to CoinGecko, it’s some way behind such heavyweights as Coinbase and Kraken with $5.9 billion and $1.5 billion respectively.

Binance.US, which is the U.S. affiliate of Binance.com, is in third place in terms of daily trading volumes with $1.2 billion.

FTX.US, however, will surely be anticipating the increase in overall trading volumes once the exchange is able to open derivatives trades. Currently, the Chicago Mercantile Exchange (CME) is the only regulated venue in the U.S to offer futures and options on Bitcoin and Ethereum.