Comment Text:
We are supportive of FTX US’s proposal to offer margin directly to its users and believe that their real-time risk and margining system is superior in many ways to traditional asset class derivative exchanges. Additionally, allowing a derivatives exchange to interact directly with its user base, as opposed to being intermediated by an FCM, gives a more salient picture of risk profiles to both individual entities and the broader ecosystem. US financial markets, and particularly derivative markets, are exceedingly more liquid and higher volume producing than their global counterparts in traditional asset classes; however, looking at the global Crypto derivatives market, the US accounts for less than 5% with the only option being the CME currently. This is because new asset classes like crypto require new standards from their user base and regulators alike. By integrating their spot exchange with the proposed derivatives structure, FTX users would be able to collateralize positions in both underlying “physical” crypto as well as cash, which offers a better experience for both capital efficiency as well as risk mitigation for users hedging spot holdings in the derivatives market. FTX’s proposal gives users a superior experience to those currently available while also setting an example for what the next generation of risk management will look like for the derivatives markets.
