Following in the footsteps of Sam Bankman-FTX.US, Fried’s CME Group has proposed to authorities its own scheme to provide derivatives trading directly to customers.
The Wall Street Journal reported that CME Group, one of the main exchanges for trading derivatives and other financial contracts, submitted papers to register as a so-called futures commission merchant (FCM).
If authorities accept the proposals of the exchange, traders would be allowed to trade derivatives directly with CME rather than via brokers. Individuals often trade derivatives using third-party brokerages such as TDAmeritrade.
CME’s idea is comparable to FTX.US’s proposal to let traders post margins and trade cryptocurrency futures directly on its platform.
The president of CoinFund, Christopher Perkins, went to LinkedIn to remark on the Journal’s reporting: “This is noteworthy and unsurprising.” “Since I can recall, The CME Group has valued direct ties with customers.”
Nonetheless, CME opposed FTX’s comparable plan. In a May congressional hearing, CME Group CEO Terence Duffy said that FTX.US made “false promises of breakthroughs that are nothing more than cost-cutting measures.”
If its application is accepted, CME’s entry into the futures brokerage industry would be a “game changer” and a “major issue for every FCM” if CME sets costs lower than those of intermediaries, according to Joseph Guinan, CEO of FCM Advantage futures.
Regarding FCMs and risk management, a CME representative said to the Journal, “Our commitment to the FCM model and the substantial risk management advantages it offers to all industry participants is steadfast.”