CME Group will compete with the crypto company FTX after it officially applied for the status of a forward commission trader
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Answer CME Group will compete with the crypto company FTX after it officially applied for the status of a forward commission trader
It was reported that one of the largest financial derivatives companies in the world, CME Group, submitted papers to become a future commission trader (FCM), according to a report published by the newspaper “The Wall Street Journal“.
Wall Street Journal editor Alexander Osipovich explained that CME submitted the registration in August 2022, and he believes the company is following the lead of cryptocurrency FTX.
If the CME Group’s FCM registration is approved, CME will be able to offer derivatives directly without the need for brokerage firms such as TDAmeritrade, Saxo Bank Interactive Brokers, Robomarkets and Grandcapital.
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FTX is also awaiting CFTC approval to become a derivatives clearing firm.
Last March, the Commodity Futures Trading Commission opened for public comment so you can get insight into the FTX proposal.
In mid-May, CME Group President and CEO Terry Duffy wrote that the FTX move could pose risks to the market.
Duffy said at the time:
The FTX proposal is blatantly incomplete and poses a significant risk to market stability and market participants.
FTX proposes implementing a light risk management clearing system that would significantly increase market risk by removing up to $170 billion of loss-absorbing capital from the clearing derivatives market, eliminating standard credit checks, and destroying risk management incentives.
The report details that Joseph Jenan, Chairman and CEO of Adventure Futures, says the move could be very dramatic.
He added:
I don’t expect the CME to go the way of competing directly with FCM clients for clients.
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However, if they go down this path, it will be a game changer in the FCM industry and that will be a major concern for every FCM.
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